20 aircraft that were leased to the insolvent airline Go First have been requested to be deregistered by the Directorate General of Civil Aviation (DGCA), which will allow for their repatriation.
According to filings published on the website of the sector-regular Directorate General of Civil Aviation (DGCA), lessors have requested the deregistration and repossession of 20 aircraft leased to the struggling Go First airline under the terms of Irrevocable Deregistration and Export Request Authorization (IDERA).
As per the IDERA regulations, in circumstances such as lease rental defaults, authorities must deregister the aircraft and allow the lessors to reclaim it within five working days after receiving a request. This implies that unless Go First obtains legal assistance, it may lose more than a third of its fleet in less than a week.
The request filed
Cash-strapped Go First filed for voluntary insolvency with the NCLT on Tuesday, blaming engine maker Pratt & Whitney (P&W) for its financial plight.
During the hearing before the National Company Law Tribunal (NCLT), which reserved its decision on Thursday, aircraft lessors vehemently opposed Go First’s urgent request for voluntary insolvency resolution proceedings and a moratorium on the financial obligations.
The airline said that it was forced to register to the NCLT after the escalating number of failing engines supplied by Pratt & Whitney’s International Aero Engines, which led to the grounding of 25 aircraft and significant financial stress.
The hearing with NCLT
A two-member NCLT panel composed of President Justice Ramalingam Sudhakar and Member L.N. Gupta heard the arguments for and against the petition for over four hours as the airline grapples with a severe financial crunch and is preparing to stop flights.
If the NCLT accepts Go First’s application for corporate insolvency resolution under Section 10 of the Insolvency and Bankruptcy Code, a total moratorium will be imposed, making it difficult for lessors to recover aircraft, according to legal experts. Experts believe that now that the tribunal has reserved its decision, lessors will be able to recover aircraft.
Go First is stuck in an unimaginable situation
According to Go First, P&W, the only supplier of engines for A320neos, failed to meet contractual duties and refused to comply with an arbitration ruling from the Singapore International Arbitration Centre (SIAC). It also said that more credible engine failures over the next 3 to 4 months would have made its operations “unviable”. The airline said in a statement on Tuesday that it intends to return to the air soon once their problems are solved, especially the matter with Pratt & Whitney (P&W).
Counsels for aircraft lessors such as SMBC Aviation Capital questioned why Go First was so eager to begin CIRP, or interim protection, and they also dismissed the airline’s argument that lessors have no locus standi in the case. The lessors claim they have the right to respond to Go First’s petition and that if a moratorium is granted, they will be unable to return their planes.
The airline also urged in its plea to the NCLT that the DGCA, Airport Authority of India (AAI), and private airport operators refrain from deleting any departure or parking slots allocated to the company. The airline also prefers that the current contractual agreements remain in place so that fuel suppliers can continue supplying aircraft operations.
According to the petition filed before the NCLT, the amount owed to aircraft lessors is Rs. 2,600 crore. The loan burden to financial creditors was Rs. 6,521 crore as of April 30. The airline’s net loss rose to Rs. 3,600 crore last year from Rs. 1,807 crore in 2021-22. The net loss was Rs. 1,346.72 crore in 2020-21.
