EXPERIENCING TURBULANCE

NCLT's decision to admit the voluntary insolvency petition of Go First has raised concerns among lessors and creditors about risks associated with aircraft leasing in India and the fallout on air travelers

- Ashish Sinha

India’s domestic aviation sector is caught between a strong headwind and a course-changing crosswind. Already reeling under high fares on key domestic routes as a result of Go First cancelling a major bulk of its flights, it has to now contend with the legal spat involving the ultra-low-cost airline and the National Company Law Tribunal (NCLT) on one hand, and the airline’s lesser and creditors on the other, which threatens to have a long-term fallout for the sector as a whole.

The Story Thus Far

The troubles of the Wadia Group promoted Go First came to light on May 2 when it filed for voluntary insolvency proceedings before the NCLT and starting cancelling flights beginning May 3. In its plea, Go First blamed Pratt & Whitney (P&W) for ‘faulty’ engines as the reason why nearly half its 54 Airbus A320neos had to grounded. P&W, a part of Raytheon Technologies, has dismissed the airline’s claims as baseless.

Admitting Go First’s plea on May 10, the NCLT in an interim order granted relief to the airline, imposing a moratorium on the airline’s financial obligations. This meant that the lessors of Go First would not be able to take possession of the aircraft which are on lease.

Expectedly, lessors have vehemently opposed the NCLT’s interim order as they seek to repossess their planes. In fact, at least three aircraft lessors have challenged the insolvency. They have sought to re-possess aircraft and export or re-lease the planes to other functional airline operators. The protection granted to Go First has also sparked international ire.