Voluntary insolvency: Bleak future ahead for GoFirst

GoFirst’s distress call with insolvency will have a jarring impact on the Indian aviation industry, say experts.

Taking lessons from Jet Airways, lessors are likely to take back their aircraft before the application is accepted and the moratorium is implemented. Online and offline travel agents haven’t been informed about the cancellation of the flights, which is likely to cause mayhem at airports. Along with this, the airline’s revival looks bleak.

Drawing parallels

Not long ago, another promising airline, Jet Airways, was knocking on the NCLT’s doors for a resolution. One can expect 3-4 things to happen hereon. Taking lessons from Jet Airways’ long-drawn insolvency process — where lenders had to run pillar to post to deregister their aircraft — lessors will be the first movers this time.

Nitin Sarin, Managing Partner, Sarin & Co, said just like it happened at the time of Jet, the way forward is possibly that once the case is admitted, according to Section 14, the NCLT must issue a moratorium. This essentially means that no other cases or claims can be filed or heard for a specified period of time.

“More importantly, lessors cannot take their aircraft back as there is a prohibition to do so. When Jet was grounded, there was a flurry of lessors who filed their irrevocable deregistration and export request authorisations (IDERA) with the Directorate General of Civil Aviation (DGCA) to deregister their aircraft (before the moratorium kicked in). The difference between Jet and GoFirst is that Jet was taken by the lenders to the NCLT and GoFirst has filed for insolvency on its own. However, there is essentially no difference in the ramifications,” he said.

However, lenders can still proceed against a company as a “wilful defaulter” even if the entity concerned has opted to go in for voluntary liquidation, sources said.

Airport situation

Another person close to the development said that in a meeting on Tuesday, three lessors, who had over 14 aircraft, were likely to apply for deregistration. businessline had reported that six aircraft were deregistered by two lessors over unpaid dues.

Another thing that can be expected is a mayhem at airports as passengers weren’t informed well in advance about possible cancellations. Though the airline did put out a public notice on its website, yatra.com’s spokesperson said GoFirst’s flights for the next two days are currently unavailable, but flights from May 5 are available for now, which is the same across online travel agencies (OTAs).

“We are continuously following up with the airline and are awaiting an update from their end on rescheduling and refunds,” the company said.

Another OTA, requesting anonymity, said it hadn’t received any official communication.

Just like at the time of Jet’s grounding, airlines are likely to go back to their drawing board to try and capture slots at congested airports like Mumbai, Delhi and Chandigarh. Back then, SpiceJet had made a swift move to grab the slots, which didn’t work in its favour. According to industry experts, IndiGo and Akasa are likely to benefit more, if the slots become available.

Lastly, employees may knock on the court’s doors to get the airline to clear their arrears.

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