Go First heads towards liquidation after failed bids

Go First, the embattled airline, is on the brink of liquidation after unsuccessful negotiations with potential buyers, including EaseMyTrip CEO Nishant Pitti, SpiceJet Chairman Ajay Singh, and Sharjah-based Sky One Aviation.
Following five months of discussions, the creditors and prospective bidders have reached an impasse, making liquidation the most viable option, according to The Economic Times.

Recently, the airline was ordered to return all four of its engines to Engine Lease Finance BV. The National Company Law Tribunal (NCLT) has extended the insolvency process deadline to August 3, warning that no further extensions will be granted.

The Committee of Creditors (CoC) is now preparing a voting proposal for the airline’s liquidation, which is expected to be presented this week. This proposal involves selecting a liquidator, estimating liquidation costs, and securing funding. This move follows failed bids from potential buyers, who had heavily relied on ongoing arbitration claims in Singapore against US-based engine maker Pratt & Whitney (P&W).

Go First’s creditors are seeking over USD 1 billion from P&W, alleging that faulty engines supplied by the company led to the grounding of half the airline’s fleet and its subsequent bankruptcy. Despite the risks associated with arbitration, creditors prefer this approach over selling the airline at a low price. The expected recovery from the arbitration is around INR 8,500 crore, while additional recovery is anticipated from auctioning a prime 94-acre land parcel in Thane near Mumbai.

Go First filed for voluntary insolvency on May 2, 2023, under Section 10 of the Insolvency and Bankruptcy Code (IBC), with the NCLT admitting the plea on May 10, 2023. The airline, which owes creditors approximately Rs 6,200 crore, follows in the footsteps of Kingfisher Airlines and Jet Airways, highlighting ongoing challenges in India’s aviation sector. Major creditors include Central Bank of India, Bank of Baroda, and IDBI Bank with admitted claims of Rs 1,934 crore, Rs 1,744 crore, and Rs 75 crore, respectively.