NCLT order on Go First airline upheld, lessors can’t repossess planes for now

The lessors that had moved the NCLAT against the moratorium were SMBC Aviation Capital, GY Aviation, SFV Aircraft Holdings and Engine Leasing Finance BV.

The NCLAT also allowed insolvency resolution professional Abhilash Lal to continue operating Go First in accordance with the NCLT order, which said the airline’s status as a going concern should be maintained.

Between May 4 and May 9, lessors sought de-registration and repossession of 45 of Go First’s fleet of 55 aircraft. The lessors asked the Directorate General of Civil Aviation to allow them to repossess and fly out the planes using their Irrevocable De-registration and Export Request Authorisations (IDERAs). An IDERA empowers lessors to get their aircraft deregistered from the registry of the country where the lessee is based, repossess them, and fly them out, in cases like lease payment defaults. As per norms, aviation regulators are required to deregister the aircraft and allow the lessors to repossess them within five working days of a request being filed.

However, before the five working days lapsed, the NCLT admitted the Go First plea, on May 10, and the moratorium came into effect. The lessors then moved the NCLAT challenging the NCLT order.

The cash-strapped carrier announced on May 2 that it was filing for voluntary insolvency proceedings with the NCLT, blaming engine manufacturer Pratt & Whitney (P&W) for its financial situation. The airline said it was “forced to apply to the NCLT” after “the ever-increasing number of failing engines supplied by Pratt & Whitney’s International Aero Engines” led to the grounding of 25 aircraft, or half its fleet of Airbus A320neo planes, and significant financial stress.

Go First said that P&W—which is the exclusive supplier of engines for the airline’s A320neos—had failed to meet contractual obligations and refused to comply with an arbitration award from the Singapore International Arbitration Centre. It added that more likely engine failures over the next three-four months would have made its operations “unviable”.

In its initial filing with the NCLT, the beleaguered airline said that it owed Rs 6,521 crore to financial creditors. While the carrier had not defaulted on its dues till April 30, it informed the NCLT that given its current financial position, defaults would be “imminent”. The carrier did, however, default on payments to operational creditors, including Rs 1,202 crore to vendors and Rs 2,660 crore to aircraft lessors.

The airline cancelled all its flights starting May 3 and has not resumed operations yet.