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By Srishti Ojha: The National Company Law Tribunal (NCLT) has reserved its orders on a plea by Go First Airlines for the initiation of voluntary resolution proceedings.
In its plea to commence the corporate insolvency resolution process (CIRP), Go First has blamed engine manufacturer Pratt & Whitney (P&W) for its financial situation.
The airline has stated that the board of directors of the company, after considering the present situation, have recommended commencement of CIRP for the company to its shareholders. The same has been done in view of the foregoing and taking into consideration the inability on the company’s part to sustain its operations and its debts far outweighing its revenue generation, which is consequently impacting its ability to repay its debts.
Go First has told NCLT that it has already cancelled 4,118 flights (in the last 30 days) with 77,500 passengers and will be constrained to cancel further flights in line with the capacity remaining with the company.
ALSO READ | Go First cancels all its flights till May 9, cites ‘operational reasons’
Further, the company will be inevitably forced to continue with the cancellation of more flights if urgent actions are not taken for its survival and resolution.
It has also expressed great possibility of aircraft lessors continuing and expediting their actions for grounding and repossession
of the aircraft from the company.
“If the company loses possession of the aircraft and the legal right to operate them, then continuance of its business as a going concern will be at stake, which will directly impact the employability of 7,000 direct and 10,000 indirect employees and debt repayment to creditors such as public sector banks and financial institutions, which have significant debt exposure in the company and 1.8 million consumers of the company,” Go First has said.
The airline has stated it is facing an extreme cash crunch due to negative profitability, inability to generate adequate cash flows and increasing creditor overdues.
Furthermore, the company is facing severe hardships in operating its business due to the limited number of serviceable engines at its disposal.
According to the airline, its management has made all efforts to endure as long as it can on account of the financial support provided to it by promoters/shareholders from time to time.
ALSO READ | Go First files for bankruptcy: Recounting the turbulent history of Indian aviation
WHAT ELSE GO FIRST SAID IN ITS PLEA
The company has paid Rs 19,980 crore to its creditors, out of which Rs 5,400 crore was paid to the lessors in the last two years towards lease rent and maintenance reserve, despite 40% to 50% of the fleet being unable to fly.
It has stated that it has now exhausted all financial resources, including full utilisation of — facilities availed from bank/other financial institutions of Rs 6,435 crore, Rs 175 crore availed from the group companies, and facility availed under the ECLG Scheme amounting to Rs 1,292 crore from the banks, and is managing only to pay operating cost with no lease rent to lessors.
The airline has told the NCLT that till now, a sum of approximately Rs 11,463 crore is owed to its creditors, including dues towards banks, financial institutions, vendors and aircraft lessors.
It has submitted that currently, the assets of the company are not sufficient to meet its liabilities.
Due to such financial stress, the essential goods and service providers (including fuel suppliers) are not ready and willing to offer their services and it is becoming increasingly difficult to run the business of the company as a going concern.
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