More trouble for Go First! Six lessors invoke letters of credit, issue notices to airline

Cash-strapped Go First on Tuesday said lessors have started actions against the airline to ground and repossess aircraft. 

The company said it has received notices from lessors for termination of aircraft lease agreements as six of them have invoked letters of credit. 

The firm has defaulted on payments to the operational creditors, including Rs 1,202 crore to vendors and Rs 2,660 crore to aircraft lessors.

Central Bank of India, Bank of Baroda, IDBI Bank, Axis Bank, Deutsche Bank and UT Finance Corp are Go First's financial creditors. 

Go First said a total of Rs 11,463 crore is owed to creditors, including banks, financial institutions, vendors, aircraft lessors.

Go First said its total debt was Rs 6,521 crore as on April 28 and that as on April 30 it hasn't defaulted to pay its financial creditors.

"However, considering the present financial situation of the corporate applicant, defaults to financial creditors would be imminent," the airline said in its bankruptcy filing.

Go First on Tuesday said it has been forced to seek voluntary insolvency resolution proceedings due to ''serial failure'' of Pratt & Whitney engines resulting in grounding of 50 per cent of the fleet and is no longer in a position to continue to meet its financial obligations.

The latest move by the Wadia group-owned carrier, which has been flying for more than 17 years, came after arbitration proceedings in Singapore and a suit filed in a US court seeking enforcement of the arbitration award last month.

Go First said it has been forced to apply to the National Company Law Tribunal (NCLT) because of the recurring and persistent issues with the GTF (Geared Turbofan) engines supplied by P&W.

Also, Pratt & Whitney has failed to repair those engines and/or provide sufficient spare leased engines as it was required to do pursuant to its obligations under the relevant agreements between them.

Promoters have infused funds worth Rs 3,200 crore into the airline in the last three years and out of the total amount, Rs 2,400 crore was injected in the last 24 months. An amount of Rs 290 crore was pumped in April this year.

''This brings the total investment in the airline since its inception to approximately Rs 6,500 crore,'' the statement said.

Further, Go First said it has received significant support from the government's Emergency Credit Line Guarantee Scheme (ECLGS).

''Even this collective and significant support has not been adequate to prevent the enormous damage caused by Pratt & Whitney's defective engines.

''The grounding of close to 50 per cent of its fleet due to the serial failure of Pratt & Whitney's engines, while incurring 100% of its operational costs has set Go First back by Rs 10,800 crore in lost revenues and additional expenses,'' it said.

According to the airline, it is no longer in a position to continue to meet its financial obligations and has taken the step to approach the NCLT ''to protect the interests of all stakeholders''.

Go Airlines (India) Ltd, which operates under brand Go First, has applied to the NCLT for resolution and protection under Section 10 of the Insolvency and Bankruptcy Code ''due to the ever-increasing failure of the Pratt & Whitney engines that power its fleet'', the statement said.

The airline, which has been grappling with engine issues since January 2020, said it has been forced to move the NCLT as P&W refused to comply with an order issued by the Singapore International Arbitration Centre (SIAC), an emergency arbitrator.

The arbitrator had ordered P&W to take all reasonable steps to release and dispatch without delay to the airline at least 10 serviceable spare leased engines by April 27 and another 10 spare leased engines per month until December 2023, as per the statement.

''If Pratt & Whitney had followed the directions laid down in the award, Go First would have been able to return to full operations by August/September 2023 leading to Go First's financial rehabilitation and survival.

''Pratt & Whitney has failed to provide any further serviceable spare leased engines at all at the date of this press release and has stated that there are no further spare leased engines available,'' the statement said.

The airline also said that it regrets the disruption and inconvenience that the latest move will cause to its customers, travel partners, creditors, and suppliers and, in particular, to its own employees.