Go First Insolvency Saga: Bidders’ Offers Fall Short, Lessors Seek Court Action
The insolvency proceedings of Go First, grounded since May 2023, have hit a snag as bids from two competing parties fail to meet the financial demands of the resolution process. According to CNBC-TV18, neither bid from Sharjah-based Sky One nor the Ajay Singh-Nishant Pitti consortium covers the insolvency administration costs of INR6 billion (USD72.4 million), casting doubts on their viability. Furthermore, the ongoing legal battle sees the airline’s administrator defending against contempt charges from lessors over alleged neglect of aircraft maintenance.
Sky One’s offer includes an upfront payment of INR4.1 billion (USD49.5 million), while the Singh-Pitti consortium proposed INR2.9 billion (USD35 million), both falling short of the necessary funds to cover the insolvency costs, let alone the total creditor claims amounting to INR65.21 billion (USD787 million). The bidders are banking on a favorable outcome from Go First’s lawsuit against Pratt & Whitney over engine issues, with both plans hinging on using lawsuit proceeds to address the airline’s debts.
This reliance on an uncertain lawsuit outcome has caused concern among Go First’s Committee of Creditors, which includes banks owed INR37.53 billion (USD453 million). With the lawsuit’s resolution timeline unclear, creditors are left uncertain about when they might recoup their funds. The Committee has reportedly urged Go First’s administrator, Shailendra Ajmera of Ernst & Young, to negotiate higher upfront payments from the bidders.
In a parallel development, several lessors, including DAE and ACG Aircraft Leasing Ireland Ltd, have moved the Delhi High Court on March 1, seeking contempt charges against Ajmera for failing to maintain the aircraft fleet as per court orders. Ajmera’s legal representation claimed “partial compliance” with the orders, citing the resignation of the previous Continuing Airworthiness Management Organization (CAMO) and manpower shortages as reasons for delays. An agreement to use a third-party maintenance provider has been reached, although lessors remain unsatisfied, having struggled to ensure their assets are adequately maintained since Go First’s grounding.
Justice Tara Vitasta Ganju has given Ajmera a week to decide on maintaining responsibility for the aircraft or transferring it back to the lessors, a decision that will have significant implications for the future of Go First’s fleet and the resolution of its insolvency.
As the April 4 deadline to secure a buyer looms, the complex interplay of insufficient bid payments, legal challenges from lessors, and the reliance on an uncertain lawsuit outcome underscores the turbulent path to resolution for the beleaguered airline.