Go First will need to raise funds, says IRP; lenders to classify their loans as non-performing: Report

Go First will need to raise funds to continue, newly-appointed resolution professional Abhilash Lal of Alvarez & Marsal, reportedly informed staff on Thursday. This comes after the National Company Law Tribunal (NCLT) admitted the beleaguered airline’s plea for insolvency proceedings on Wednesday, and appointed Lal as its interim resolution professional. 

News agency Reuters, citing a source, said that Lal said that they were working on a very tight schedule. “We have to get the business back running…We have to raise funds to do it,” Lal was quoted as telling employees.  

Separately, Go First lenders are expected to classify their loans to the company as ‘non-performing’ in the current quarter. They are reportedly hopeful that the collateral backing the credit would reduce the quantum of haircut they have to take, the agency reported. 

The report quoted a banker saying that the account will have to be declared a non-performing asset in the current quarter, and the account will also have to be provided for. As per the Reserve Bank of India, banks have to provision for at least 15 per cent of outstanding loans on secured assets in the first 12 months. Provision refers to losses that the banks recognise ahead of time, and is a way to eventually anticipate the volume of its gross and net loan portfolio. 

As per the Go First bankruptcy filing, Central Bank of India, Bank of Baroda, IDBI Bank, and Deutsche Bank are among the airline’s financial creditors. 

Go First that blamed engine-maker Pratt & Whitney said in its NCLT plea that it incurred heavy losses due to the grounding of half of its fleet, which was the result of the faulty engines provided by the US firm. It said that the non-availability of planes and engine failures cost Go First Rs 10,800 crore in the form of revenue and additional expenses. 

In its plea, the airline said that its financial performance also deteriorated due to the COVID-19 pandemic, apart from the engine failures. Its losses increased from Rs 1,346 crore in FY 2020-21 to Rs 3,600 crore in FY 2022-23. Additionally, its expenses increased from Rs 2,250 crore in FY 2014-15 to Rs 5,907 crore in FY 2022-23.

Even as NCLT admitted Go First’s insolvency plea, the proceedings are unlikely to go smoothly. SMBC Aviation Capital, one of the airline’s lessors, moved National Company Law Appellate Tribunal (NCLAT), challenging the NCLT order. It argued that NCLT denied an opportunity for the lessors to put forth their case.

Also read: Go First likely to resume flights from May 24 with reduced schedule, aircraft: Report

Also read: Go First Insolvency: 'IRP is claiming aircraft that Go First doesn't own,' says lessor SMBC Aviation at NCLAT hearing