Go First wants bankers take 75 pc haircut on loans

Go First

Rama Krishna Sangem

Go First, Mumbai based private airlines that filed an insolvency petition before NCLT (National Company Law Tribunal) wants its bankers to take a haircut by 75 per cent of their loans. In banking terms, haircut means the bankers had to write off their loans, fearing complete washout from the bankrupt customers.

Go First, owned by Wadia Group, filed its insolvency petition on May 2, Tuesday and NCLT is expected to take it up on May 4, Thursday. But, the airlines told the tribunal one thing clearly –that it doesn’t want to shut company. It will continue, but it is not in a position to payback its loans and interest to the lenders. So, a haircut must.

As of now, the airlines owes around Rs 9,000 crore to a half a dozen bankers, both public and private. If NCLT accepts Go First’s plea, the bankers will have to write off around Rs 6,000 crore. That will be a huge loss to the banks like ICICI, Bank of Baroda, Axis Bank, among others who formed a consortium to lend this airline.

Indian banks which are just emerging out of the vexed problem of bad loans after making huge provisioning will face another blow from Go First. Whether this will create our own banking crisis, though on a smaller scale? Will Go First be able to survive after this bail out package from the bankers? We still don’t know the answers.


Why this Crisis?

Why Go First went burst at a time when Air India led by Tatas is buying record number of aircrafts and is on the expansion plans? Why this low-cost no frills carrier made losses when the air traffic is back to pre-Covid levels? Go First CEO Kaushik Khona blamed US aviation company, Pratt& Whitney (P&W) for its faulty engines for the whole problem.

Khona says, around 50 per cent of its flights had to be grounded as aircrafts suffered due to serial failure of P&W’s engines. Go First has about 50 aircrafts and 28 of them are down to engine fault. With these limited fleet, it cannot run profitable business due to salaries and other maintenance costs

Now it is the job of NCLT to take a view on the haircut request of the airlines. As of now, the Wadia group which promoted Go First has no plans to exit the company totally. At the best they may sell a portion of their stake to new lenders or bankers. Till May 15, the airlines is not selling tickets, future course of activity depends on NCLT’s orders now.

Rama Krishna Sangem

Ramakrishna chief editor of excel India online magazine and website

Leave a Reply

Your email address will not be published. Required fields are marked *

Next Post

Alleged drone strike on Putin may aggravate Ukraine war

Wed May 3 , 2023
  Rama Krishna Sangem   Russia accused Ukraine on May 3, Wednesday of attacking the Kremlin with drones overnight in an attempt to kill President […]

You May Like

Chief Editor

Rama Krishna Sangem

Excel India national news magazine is a media startup founded and piloted by Rama Krishna Sangem, a Hyderabad based senior journalist with over three decade experience in the field of media, mostly in print journalism. His rich experience in reporting for both Telugu and English newspapers and heading a TV news channel and some online outfits will be of immense use to this venture. Excel India English news magazine seeks to fill the gap of analytical understanding to our readers who today are confronted with myriad media platforms. Our online version not only offers regular updates and commentary on happenings around us, but also gives larger stories not limited by space constraints of a print magazine. Excel India is ably run by a team of senior journalists committed to values and quality standards in the profession. We urge you all to support and guide us in this endeavour. Reach us at excelindiaweb123@gmail.com