The Go First case: India's insolvency court needs an understanding of aviation

The National Company Law Tribunal displayed no sense of urgency in the Go First case. Dates for hearings were given after considerable gaps when the need was to hear the case on priority.   

A person with aviation experience would have cautioned that a growing timelapse would mean fading prospects of Go First finding a buyer. In this case, even the ministry of civil aviation and the directorate general of civil aviation did not help the cause.

Also read: Reviving Go First won’t be easy. Here’s why

Go First voluntarily applied for insolvency on 2 May. The NCLT admitted the case on 10 May by placing a moratorium on all the assets of the airline without hearing the other stakeholders, notably aircraft lessors. If there was any prospect of salvaging the airline it lay in dealing with the matter swiftly. 

But what we witnessed on 26 April, when the Delhi High Court ordered the DGCA to deregister all 54 Go First aircraft, was an end that had no suspense left for industry watchers. 

Go First is not the first airline that has been unable to revive through the insolvency process. Jet Airways is still struggling to revive since its lenders have not been on the same page as the new promoters selected through the insolvency process.

These actions by lenders and the tribunal clearly show that the insolvency court and banks do not realise the urgency when it comes to salvaging an airline in a market environment of rapid and sustained growth.  

In the case of Go First, the decision of the promoters to take the airline for insolvency was not only suspect from the very beginning but also laden with mischief. Go First’s plea for voluntary insolvency resolution was accompanied by an announcement on the suspension of its flights for two days—3 and 4 May—followed by about 20 further suspensions to perhaps give an erroneous impression that the airline had been grounded for only a brief period.

Also read: Will this ₹7,000-crore rescue plan save Go First?

Judging from the limited perspective of Go First’s inability to meet its financial commitments, the voluntary insolvency action can be described as a master stroke—the airline gained moratorium on all payments. Simply put, the airline management bought relief for itself by not having to bother about marshalling resources for payments to vendors and lenders.

However, from the perspective of the airline business, it was a disastrous decision since Go First remains grounded, with no solution on the horizon. Unfortunately, as with Kingfisher and Jet Airways, which collapsed in 2012 and 2019, respectively, Go First’s promoters too continued to display misplaced bravado, making it appear that a resumption of flights was on the anvil when it wasn’t.  

Lenders pursuing the case ought to have asked themselves a simple question: has any airline after a prolonged suspension of operations taken to the skies again? Even if merely for academic interest, one would like to know from where Go First’s misplaced optimism emanated when all actions showed that there wasn’t any hope for revival. Prolonging the agony was totally unwarranted.  

The NCLT’s unilateral decision on imposing a moratorium led to 54 aircraft remaining grounded at various airports across the country for around a year, until the Delhi High Court recently decided to let aircraft lessors repossess their capital-intensive assets. The avoidable prolonged delay hasn’t helped the country’s campaign of ease of doing business in India.

Jitender Bhargava is a former executive director of Air India and the author of ‘The Descent of Air India’