Go First crisis: Uncertainty persists as Scindia, DGCA deny receiving any firm proposal on resumption of flights

A day after the beleaguered Go First claimed in an internal note to staff that it would be resuming operations following an audit by the aviation regulator the Directorate General of Civil Aviation (DGCA), civil aviation minister Jyotiraditya Scindia has said his department was yet to hear from the low-cost carrier (LCC).

“We have not received anything [concrete] from Go First so far. We will be taking a final decision on permissions to the airline after examining all safety protocols,” the minister said on the sidelines of the industry chamber CII’s annual session Wednesday.

Echoing the minister, senior DGCA officials disclosed to Business Today, “We will take a final view on the audit only after Go First submits a firm proposal on resumption of operations with us.”

Despite selective leaks to a section of the media by Go First officials on everything from their plans of returning to the skies to holding parleys with a clutch of global private equity investors to raise funds, the LCC’s future continues to remain uncertain. It’s an uncertainty despite the carrier’s small size relative to the Indian market has also put the domestic aviation industry on the edge in the near and medium term.

With the apex arbitration panel, the National Company Law Appellate Tribunal (NCLAT) upholding the National Company Law Tribunal (NCLT) moratorium disallowing repossession of aircraft by Go First lessors, the clamour for India to align its laws with the international conventions and treaties on aviation has grown.

Lessors are especially fearful of critical parts such as engines and landing gear from their aircraft on the ground getting cannibalised to operate flights by aircraft that are still airworthy.

Following the NCLAT ruling, it is now expected that the affected lessors may seek an urgent hearing by a vacation bench of the Supreme Court of India.

The Mumbai-headquartered Go First sent the global aviation industry into a tizzy after it applied for a "voluntary bankruptcy resolution" with NCLT on May 2, claiming that technical glitches with next-generation engines supplied by Pratt & Whitney (P&W) had hit normal operations leading to mounting losses.

The airline also announced the suspension of all flight operations from the following day.

Go First narrative damaging Indian civil aviation

Ever since the story broke, regular on and off-record pronouncements by Go First officials have made the whole saga appear to be a fight between a diminutive David (Go First) and the big bad Goliath (P&W).

“This narrative might be great for domestic consumption and great if Indian carriers would be happy to rely on Russian and Chinese aircraft in the future,” an international aviation expert told BT over the phone requesting anonymity.

“However, nobody seems to be asking why Western lessors should take a country risk on India in the future. Okay, you might get to keep my aircraft for now but then why would I or any of my peers put their aircraft here going forward!” he warned.

“The awfully long duration of the moratorium under the Insolvency and Bankruptcy Code (IBC), 2016, is in contrast with the provisions of the Aircraft Protocol to the Cape Town Convention. Questions are also being raised about India’s commitments to international obligations under the Convention and India continuing to be one of the riskiest jurisdictions in the world when it comes to aircraft leasing and financing,” opined the managing partner at the law firm KLA Legal, Ajay Kumar.

The primary aim of the Cape Town Convention and Protocol is to resolve the challenge of obtaining certain and opposable rights to high-value aviation assets, viz. airframes, aircraft engines and helicopters that by their very nature, have no fixed location. While India is a signatory to the Convention, it is yet to ratify it, and, as such, its certain provisions are in conflict with the country’s bankruptcy laws.

“If the lessors realise that India continues to be a risky jurisdiction, the lessees [airline companies] will end up paying a risk premium on new billings,” cautions KLA Legal’s Kumar.

This would effectively raise operational costs for airlines, which in turn would get passed on to passengers by way of higher fares.

The initial sympathy garnered by the airline has slowly given way to rising incredulity over its claims of filing for bankruptcy resolution solely on grounds of P&W’s defective engines.

BT in its coverage of the crisis has also highlighted the role played by frequent exits at the senior management level, regular delays to staff salaries, an attrition rate that was among the highest in the Indian industry and repeated postponements to the company’s plans of listing on the bourses in the current mess.

Consequently, the Ministry of Civil Aviation has been keeping a close watch on the developments at Go First, industry sources told BT.