To remain current, the bankrupt airline requires approximately Rs 50 crore to Rs 70 crore every month even as the legal proceedings drag on.
Go First, the budget airline backed by the Wadias, has been grounded for nearly five months due to complex bankruptcy proceedings, raising questions about its future. In contrast, Jet Airways, which has been undergoing bankruptcy proceedings for the past four years, recently received its first funding infusion from the winning bidder. With mounting financial challenges and legal hurdles, the fate of Go First remains uncertain, and experts are drawing comparisons with the protracted Jet Airways saga.
Mounting financial struggles
Go First has been grappling with a series of financial challenges since its grounding. It has a considerable workforce of 3,000 employees and a fleet of 56 planes, with 28 of them in operational condition. To remain current, the airline requires approximately Rs 50 crore to Rs 70 crore every month. While state-owned lenders recently released Rs 104 crore for certain expenses, including employee salaries and aircraft maintenance, the airline’s monthly expenses remain substantial.
Go First’s total liabilities to all creditors stand at over Rs 11,400 crore, including dues to banks, financial institutions, vendors and aircraft lessors.
Aircraft lessors’ legal challenge
One of the most significant impediments to Go First’s revival is a legal case filed by aircraft lessors. They terminated lease agreements with the airline after Go First defaulted on payments and alleged poor management of the planes. The legal proceedings have faced delays, with both sides presenting recurring arguments. Until the Delhi High Court delivers a verdict in favor of Go First, the Directorate General of Civil Aviation (DGCA) has prohibited the airline from resuming operations. This legal deadlock further complicates Go First’s revival prospects.
Lenders in trouble
If Go First’s situation mirrors that of Jet Airways and its bankruptcy proceedings extend for four years, it could potentially cost banks around Rs 3,000 crore. This projection does not include aircraft lease payments, which would only exacerbate the financial burden on the banks.
Go First has extended the deadline for potential investors to express their interest in purchasing the airline to September 28. However, investors are awaiting the resolution of legal matters before committing. The airline is promoting its available slots, operational planes, and valid aircraft orders as enticing prospects for investors. It has also filed an arbitration case against Pratt & Whitney, seeking $ 1.2 billion in damages for alleged faulty engines. While the outcome of this arbitration will take time, it could impact the airline’s value.
Go First’s journey to recovery is marred by complexity. The airline must overcome legal challenges, satisfy creditors, and garner investor interest to take off again. Its struggle highlights the intricate nature of bankruptcy proceedings in the aviation industry and the substantial financial toll they can exact on all stakeholders involved.
