Lessors upset as moratorium keeps Go planes out of reach

Go Air’s refusal to return more than 40 leased planes amid insolvency proceedings is prompting scepticism among aircraft lessors towards India’s civil aviation market, said three people in the know.

While the insolvency plea was admitted in the National Company Law Tribunal on 10 May, the airline’s lessors had approached sector regulator, the Directorate General of Civil Aviation, on 4 May seeking de-registration of these aircraft. De-registration norms state that the process needs to be completed within five working days. However, the possession of these aircraft was stopped mid-way as the moratorium was triggered following the admission of the plea, which led to the freezing of Go Air’s assets and the planes until a resolution is reached in the insolvency process.

“Some lessors are furious,” one person said. This is in contrast to Jet Airways’ insolvency, where the lessors had time to recover the aircraft before the court proceedings began, he added. Go Air officials are now barring lessor representatives from accessing the planes, citing the moratorium clause, which is impacting lessors’ long-term view of the Indian aviation market.

For instance, lessors such as SMBC Aviation contested the admission of the plea in the National Company Law Appellate Tribunal. “The Indian aviation sector is being seen as a risky jurisdiction in light of the fate of Kingfisher and Jet Airways. Due to such difficulties, lessors and international aircraft owners see India as a risky jurisdiction for aircraft leasing. Therefore, Indian operators may have to pay a premium to take an aircraft on lease. Thus, the admission of the petition will further shake the confidence of International Aviation Industry,” SMBC told the NCLAT.

According to the Ireland-based lessor, the insolvency plea of Go Air was an attempt by the promoter group to exit the airline, or divest their shareholding, while depriving the creditors and other equipment owners of their claims and assets, SMBC alleged in its filing.

“The filing of the petition is malicious and a smokescreen. While the purpose of imposition of moratorium is for restraining the corporate debtor from disposing its assets, there can be no direct analogy to create an embargo on the creditors,” it added.

While SMBC had asked Go Air to prepare a payment plan for pending dues in February, Go Air made “false promises” to make a payment of $3 million by 26 April, and another $3.3 million by 28th, after requesting SMBC to not take any coercive action. This led to the lessor issuing a termination notice for six aircraft on 2 May, but the airline filed an insolvency plea on 2 May. “Each lessor has a right to continue its resumed possession of aircraft and to re-lease aircraft to other functional airlines including in India. The inclusion of aircraft under the purview of moratorium is with complete disregard to provisions of Aircraft Rules and government directions,” it argued.

The NCLAT is yet to pass an order on the pleas by Go Air’s aircraft lessors.