Go First crisis: Airline owes $798 million to financial creditors

Go First, that filed for voluntary insolvency proceedings on Tuesday, reportedly owes $798 million to financial creditors. The airline said in a filing that it had not defaulted on any of these dues till April 30, but defaults to financial creditors in the future are imminent. 

According to a report in news agency Reuters, the filing it accessed stated, “However, considering the present financial situation of the corporate applicant, defaults to financial creditors would be imminent."

Lenders were reportedly not aware of Go First’s plans to file for voluntary insolvency proceedings. As per the filing, Central Bank of India, Bank of Baroda, IDBI Bank, Axis Bank and Deutsche Bank are the airline’s financial creditors. They are now likely to meet soon and take stock of the situation. 

As per the Reuters report, the airline’s total liabilities to all creditors, including banks, financial institutions, vendors and aircraft lessors, stand at $1.3 billion. As per the filing, the assets of the company are not sufficient to meet the liabilities. 

Go First has defaulted on payments to operational creditors including $146 million to vendors and $318 million to aircraft lessors. As per the filing, it has received notices from lessors for termination of aircraft lease agreements, and some have even initiated action against the airline to ground or repossess aircraft. Six lessors have also invoked letters of credit issued to them by lenders, it said.

For now, the airline has cancelled its flights for May 3, 4 and 5 due to the cash crunch, leading to a show cause notice by Directorate General of Civil Aviation (DGCA) for no prior intimation for the cancellation. The airline has said that it would refund the passengers for all the cancelled tickets. 

Go First’s financial woes began with the non-supply of engines by Pratt & Whitney, which led to the grounding of 28 of its planes. It is now looking for investors to resume domestic operations. 

Also read: DGCA issues show cause notice to Go First for no prior intimation of flight cancellations

Also read: Go First files for voluntary insolvency resolution before NCLT, looking for investor to resume domestic ops