Indian Banks Withdraw Commitment to Fund Go First’s Restart as Challenges Mount

Indian banks, including Bank of India, Bank of Baroda, IDBI Bank, and Deutsche Bank, have reportedly reversed their earlier commitment to provide additional funding for the revival of Go First (GOW), the now-insolvent low-cost carrier, according to Reuters. The banks, major creditors with substantial loans tied to the airline, cite diminishing prospects of Go First resuming operations.

In June, ch-aviation reported that these banks had tentatively approved a finance package of INR 4.25 billion rupees (USD 51 million) to support Go First’s relaunch. During that time, there was optimism surrounding the airline’s prospects, with support from lenders and India’s Directorate General of Civil Aviation (DGCA).

However, a prolonged legal battle initiated by lessors seeking to repossess aircraft and engines, coupled with changes to India’s bankruptcy laws aligning with the Cape Town Convention, have significantly reduced the likelihood of Go First restarting.

An unnamed banker informed Reuters, “When the funding was approved, there was some visibility about the airline restarting operations. Now the situation is quite different, and the future is bleak.”

The DGCA recently communicated to the Delhi High Court that amendments to India’s bankruptcy laws would exclude aviation assets from repossession bans, such as those imposed by the National Company Law Tribunal since Go First ceased operations in April. Given that Go First leases its entire aircraft fleet, multiple lessors are reportedly pursuing repossession through cases in the Delhi High Court and National Company Law Tribunal.

“It seems as though Go First’s fate is sealed,” the banker remarked. “With the DGCA’s stance, restarting operations appears highly unlikely, as the aircraft will likely be repossessed.”

Go First’s creditors, including the aforementioned banks, are collectively owed approximately INR 65 billion (USD 781 million). The banks, arguing that restarting the airline offered the best chance of recovering their funds, are now facing challenges as they contend with the lifting of repossession bans, subject to retrospective court orders, currently under consideration in the Delhi High Court. Despite their arguments, the prevailing sentiment is that the banks may encounter difficulty retaining the aircraft in India.