NCLT orders liquidation of Go First, ending 20-month insolvency saga

Go First, which filed for bankruptcy in May 2023, had a 6.9% market share in India’s aviation sector at the time. However, the airline’s assets were effectively wiped out after the Delhi High Court allowed lessors to repossess its fleet of 54 planes. 

While GoFirst is the second major airline to get grounded in the last 6 years, along with Jet Airways, there is likely no major impact on sentiments for the sector. India's aviation growth story remains intact on the back of robust domestic demand and expansion by players like Air India, Indigo, and Akasa. Indian airlines have over 1500 aircraft on order, and the sector is set to grow.

Also Read: Go First's airport slots may be up for grabs for rivals soon

Experts believe the government needs to ensure the working environment for the sector is healthy, with ATF (Aviation Turbine Fuel) brought under GST. CEO of Avialaz Consultants Sanjay Lazar told Mint, "The closure of GoFirst has put a slight dampener on the aviation market in India, which has become a duopoly. However, there is ample interest from foreign investors in the Indian aviation sector, given necessary protections. There should be a more amiable environment for airlines that can then flourish and pass on the benefits to passengers."

Lazar added that India is a huge aviation market and there is still a great opportunity for at least one more full-service carrier (FSC) and two ultra-low-cost carriers (ULCC). He also stressed, "The government must bring ATF under a uniform GST and rationalize taxes and levies for airlines. The approval by the Union Cabinet of India of the 'Protection and Enforcement of Interests in Aircraft Objects Bill, 2024' will add a lot of comfort to foreign lessors and investors, as it aims to enforce the provisions of the Cape Town Convention."

Financial woes and consumer protection concerns

Go First’s financial troubles had begun when its former promoter, the Wadia Group, filed for voluntary bankruptcy i, citing delays in securing engines from Pratt & Whitney.

The major reason why Go First was unable to revive is the Delhi High Court's decision on April 26, 2023. The court directed the Directorate General of Civil Aviation (DGCA) to deregister the airline’s leased planes, following a plea by lessors who sought to reclaim their assets. Although a clarification from the Ministry of Corporate Affairs on October 4, 2023, exempted aircraft-related transactions from the IBC moratorium, it came too late to save the airline.

This left Go First without any planes, and as a result, an interested buyer—a consortium including SpiceJet’s Ajay Singh and EaseMyTrip’s Nishant Pitti—retracted their bid. The airline’s financial troubles were triggered when its former promoter, the Wadia Group, filed for voluntary bankruptcy, citing delays in receiving engines from Pratt & Whitney.

Also Read: CoC recommends EY honcho as new liquidator in Go First case

As the airline is now in liquidation, many passengers are still waiting for refunds. Industry insiders, who did not wish to be named, revealed that travel agents in India are staring at losses between ₹150-300 crore after Go First was grounded. 

Prakash believes that the government also needs to act on consumer protection in case of an airline failure. He said, "The government needs to look at a mandatory insurance scheme on tickets. There can be a small charge on every ticket. This can act as a safety net if the travel agent or airline fails. A consumer needs that protection so that passengers are able to recover their money."

Ticket Agents Association of India (TAFI) told Mint that there were signs for a long time that Go First would not survive. He said, "While the financial losses will be much lesser in comparison to the bankruptcy of the other two airlines, the government needs to ensure there is a healthy environment for airlines in India. The market is growing, domestic demand is robust, and we definitely need more airlines. We need an environment that makes it viable for airlines to fly in the country. The government should figure out a way to bring Air Turbine Fuel (ATF) under GST. There need to be some concrete steps by the central government on this."

According to legal experts, avenues to get refunds from the liquidated airline are grim. 

“The refunds of the passengers shall fall under operational debt, which under the waterfall mechanism falls quite low in the hierarchy of the debt’s repayment sequence under Section 53 of the I&B Code, so chances of passengers receiving their money are slim," said Daizy Chawla, Managing Partner at S&A Law Offices.

In September 2023, Go First filed for liquidation, stating that it had no viable assets and no feasible plan for revival. Later, NCLT appointed Dinkar Venkatasubramanian as the new liquidator, who took charge of the affairs from the previous Resolution Professional, Shailendra Ajmera.

The airline owes approximately ₹6,200 crore to creditors, with significant claims from the Central Bank of India ( ₹1,934 crore), Bank of Baroda ( ₹1,744 crore), and IDBI Bank ( ₹75 crore).

Also Read: Jet Airways liquidation: Why India needs a new regime to save airlines

Meanwhile, Go First has engaged a US-based litigation finance firm, Burford Capital, to finance its arbitration case against Pratt & Whitney, the engine manufacturer. 

The airline is seeking over $1 billion in damages from Pratt & Whitney, citing faulty engines that led to the grounding of its planes. Burford Capital is prepared to provide $20 million in the first tranche to finance the arbitration.

In addition, the lenders, including the Central Bank of India, are looking to recover at least 50% of their dues through the sale of a 94.7-acre land parcel in Thane, Mumbai owned by Wadia’s.