The National Company Law Tribunal on Wednesday granted bankruptcy protection to Go First airline after it filed a plea to initiate an insolvency resolution process, reported PTI.
On May 2, the Directorate General of Civil Aviation had issued a show cause notice to the domestic airline after it filed for bankruptcy and cancelled all its flights for May 3 and May 4. Two days later, the civil aviation regulator ordered the cash-strapped airline to issue refund to all passengers after it extended the cancellation of all its flights till May 9 and suspended ticket sales till May 15.
Go First has said that it has been forced to file for protection due to the “ever-increasing failure” of the Pratt & Whitney engines. Pratt & Whitney supplies engines for Go First’s Airbus A320neo aircraft fleet. The engine failures has resulted in the grounding of 25 aircraft, which is about half of the airline’s Airbus A320neo aircraft fleet.
The airline’s total liabilities to all creditors stands at Rs 11,463 crore, including dues to banks, financial institutions, vendors and aircraft lessors, reported Reuters. At the hearing last week, the airline had told the tribunal that there was scope for its revival, but it needed moratorium as the majority of its fleet – the only asset it held – had been grounded.
On Wednesday, a two-member bench comprising President Justice Ramalingam Sudhakar and LN Gupta put the company under protection of moratorium, reported PTI. It also directed the suspended board of directors to assist the interim resolution professional to run the company during insolvency proceedings. The tribunal has appointed Abhliash Lal as interim resolution professional to run the debt-ridden company for the time being, reported PTI.
The order also said that the company, which employs a staff of 7,000 persons, shall not lay off its employees as a matter of course.
The protection order for the airline comes after its lessors filed requests with the Directorate General of Civil Aviation for the return of about 40 Go First planes after rental payments were missed, reported Reuters.
“The next step for lessors is to approach the appellate tribunal,” Ajay Kumar from KLA Legal, which represents Go First lessors, told Reuters. “It will be a prolonged legal battle.”
Meanwhile, Chief Executive Officer of Go First Kaushik Khona termed Wednesday’s order historic, reported PTI.