GO FIRSTS BANKRUPTCY

GO FIRST earlier known as Go Air filed for bankruptcy on 2nd May, let's dive
into what led to such an action, and what can be the future consequences and
what all of this means for the rest of the industry.

Founded by billionaire Nusli Wadia in 2005, Go First became the first Wadia
company to file for bankruptcy in its 287 year history. India's third largest carrier
has also become the 3rd major airline to collapse since 2012 after Kingfisher and
Jet airways.

The company has cited the long delays in sourcing airworthy engines from the US
aerospace major Pratt & Whitney as the reason behind the decision to go for
insolvency, it blamed the american engine maker for grounding half it’s fleet as
the major cause of its insolvency, whereas experts hinted at deeper problems that
just engine issues and problems in the financial side and turbulent indian
aviation which can cause further hiccups in the coming days. Indian airlines have
reported a consolidated loss of over 17 billion dollars since FY 2010, according to
capa advisory.

Diving deeper into the engine issues, the airlines which has 61 aircrafts in its
fleet said it moved to NCLT under the Insolvency and Bankruptcy Code (IBC) due
to the ever-increasing number of failing engine supplied by p&w, which has
resulted in Go First having to ground 25 aircraft (nearly 50% of its Airbus
A320neo aircraft fleet) as of May 1.

Last week, the Delhi bench of the NCLT also appointed an interim resolution
professional (IRP) to look after the affairs of Go First and also suspended its
board as part of the insolvency resolution process.

It claimed it has lost 10,800 crore in revenue due to the groundings and
expenses paid for the grounded planes amounting to Rs.1,600 crore lease
rentals, being the primary cause of creating a tight financial situation.
 The airline’s total liabilities to all creditors stood at Rs 11,463 crore, according
to the bankruptcy filing.
"Currently, the assets of the company are not sufficient to meet its liabilities," the
airline said in the filing.
It may be noted that Go First has already defaulted on payments to operational
creditors, including Rs 1,202 crore to vendors and Rs 2,660 crore to
aircraft lessors.

Go First’s creditors include the Central Bank of India, Bank of Baroda, IDBI
Bank, Axis Bank and Deutsche Bank. Among them, the Central Bank of India and
Bank of Baroda have an exposure of Rs 1,300 crore, respectively, under a
consortium loan, while IDBI Bank has a smaller exposure of Rs 50 crore.
However, an official at the Central Bank of India told news agency Reuters that
the bank’s total exposure to the airline is around Rs 2,000 crore. In its
bankruptcy filing to NCLT, Go First said it owes Rs 6,521 crore ($797.38
million) in total to Bank of Baroda, IDBI Bank and Deutsche Bank.
Meanwhile, Go First had also borrowed Rs 1,292 crore under the government’s
emergency credit scheme, which was first introduced during the Covid-19
pandemic.

So far this month, several lessors have approached aviation regulator DGCA for
deregistration and repossession of Go First's 45 planes.
The National Company Law Appellate Tribunal will pass its order on May 22 on
petitions filed by three aircraft lessors each of them leasing around 21 flights,
against Go First’s voluntary insolvency resolution proceedings.
A look at why flying is so expensive . . . . .
 The fall of go air could mean a higher cost of air travel in the future.
This is because of possible rise in operational cost and tighter regulations in the
sector.

However, sudden disruption in operations is likely to benefit other players and

There has been impact on the other existing players in the field, for the likes of
indigo its been an opportunity with it s shares rising more than 6%
Go First's immediate competition was with Tata Group's two airliners namely former-
national carrier Air India and Vistara who hold a market share of 9% and 8.8%
respectively, could lead to a wider market to cater raising revenue and hence the
overall profits.
Coming to reparations , Go First CEO Kaushik Khona said the airline is
seeking $1.1 billion in damages from P&W.