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.
