‘India is a risky jurisdiction…,’ SMBC Aviation Capital on Go First, Jet Airways, Kingfisher failure

SMBC Aviation Capital, the world's second-largest aircraft lessor, pointed out that National Company Law Tribunal's (NCLAT) decision to block leasing firms from reclaiming Go First planes will create ripples in the markets and will also create a confidence crisis. It has also called ‘India a risky jurisdiction for aircraft leasing’. 

Apart from SMBC, other aircraft leasing firms, such as Jackson Square Aviation and Bank of China Aviation, have also raised the alarm after a tribunal gave Go Airlines (India) Ltd bankruptcy protection to allow it to revive, and at the same time, barred lessors from reclaiming their planes.

India, which is the third-biggest aviation market, saw a surge in air travel and jet orders in recent years, but the market lost some of its luster with the failures of Kingfisher Airlines in 2012 and Jet Airways in 2019.

"Lessors and international aircraft owners see India as a risky jurisdiction for aircraft leasing," after the failures of Jet and Kingfisher, SMBC told the tribunal ahead of a hearing on Friday where it seeks to quash Go First's bankruptcy protection.

"The admission of the petition (seeking protection) will further shake confidence of the international aviation industry," it added in a filing to the tribunal that has not been made public but was reviewed by Reuters.

India is a critical market for lessors, in which sale-and-leaseback deals accounted for 75% of plane deliveries from 2018 to 2022, compared with a global average of 35%, data from aviation analytics firm Cirium shows.

Go First and SMBC, which also called the Indian airline's insolvency filing a "smokescreen" to defraud creditors and lessors, did not respond to a request for comment.

NCLT orders a moratorium on Go First's assets

Go First had filed for bankruptcy earlier this month, citing a financial crisis caused by grounding almost half of its fleet due to "faulty" Pratt & Whitney engines. In response, the US engine maker denied the allegations, calling them "without merit".

NCLT on Wednesday ordered a moratorium on Go First's assets and leases and appointed Abhilash Lal of Alvarez & Marsal as the interim resolution professional to take over management with immediate effect.

The resolution professional "shall ensure that retrenchment of employees is not resorted to as a matter of course", the tribunal's 41-page order said. Go First has a staff of around 7,000."

CEO Kaushik Khona, who was present as the order was read, hailed the tribunal's decision as "historic".

(With inputs from agencies)