The National Company Law Tribunal on Wednesday awarded GoFirst, the cash-strapped airline, bankruptcy protection as it admitted their proceedings under the Insolvency and Bankruptcy Code (IBC), throwing a lifeline to the Wadia-owned airline. The tribunal appointed Abhilash Lal as the interim resolution professional (IRP), who will take over management of the company and act as an intermediary between the airline and the lenders in accordance with the provisions of the act.
The NCLT directed the suspended board of directors to extend their support to Lal and ensure no layoffs take place. The management has also been asked to deposit Rs. 5 crores for immediate expenses.
The order comes as a welcome relief to the airline as it gives the company a chance at revival. However, it complicates matters for foreign lessors' as their attempts to repossess their planes have now been thwarted.
The tribunal’s order comes a day after the Directorate General of Civil Aviation (DGCA) issued a show-cause notice and suspended the cash-strapped airline from accepting new bookings and halted the sale of tickets. The regulatory body further gave the recently rebranded airline 15 days to submit reasons behind its inability to run operations.
The grounding of Go First, which operated 27 domestic and 7 international routes, has put flyers in a lurch during the peak summer travel season. Several angry passengers took to social media to complain that the airline gave them a credit note rather than a refund of their fare.
Last week on May 4, the NCLT reserved its orders on a plea filed by GoFirst, formerly GoAir, which sought protection under insolvency proceedings. The beleaguered airline sought protection from lenders who sought to take possession of 26 planes.
During the hearing, the lenders challenged the moratorium arguing they wanted possession of their planes and that these proceedings would jeopardise their contractual obligations.
“Planes are the only assets. If these planes are repossessed, nothing will remain in the company,” the airline told the principal bench of the NCLT. “Lenders are moving to freeze accounts, and lessors are terminating agreements. There is a huge scope for revival, as our fundamentals are in place,” it added.
On May 2, GoFirst, an 18-year-old airline, filed for bankruptcy over "effectively defective engines" supplied by Pratt and Whitney. The airline was forced to ground half its 54 Airbus due to faulty engines, incurring a loss to the tune of Rs 10,800 crores.
According to their website, the GoFirst fleet comprise 59 aircraft, of which 54 aircraft are A320 NEO aircraft, and five are A320 CEO models.