Go First has joined Kingfisher Airlines, Jet Airways and many other Indian airlines that went bankrupt.?Go First filed for bankruptcy yesterday and cancelled flights for May 3, May 4 and May 5, 2023, amid severe fund shortage.
The cash-strapped airline?owes financial creditors Rs 6,521 crore ($798 million), its bankruptcy filing showed.?As of April 30, 2023, Go First Air had not defaulted on any of these dues.
"However, considering the present financial situation of the corporate applicant, defaults to financial creditors would be imminent," the airline's bankruptcy filing said.
The bankruptcy filing by Go First marks the first major airline collapse in India since Jet Airways filed for bankruptcy in 2019, and puts focus on the fierce competition in the airline sector dominated by IndiGo and the?soon-to-be-completed merger?of Air India and Vistara under the Tata group. Indigo shares have already surged 5% today amid Go First's bankruptcy filing.
Go First's?lenders were not aware of the airline's plans to file for voluntary insolvency and will meet soon to take stock of the situation, said two people familiar with the matter, as per Reuters.
Go First has blamed "faulty" Pratt & Whitney engines for the grounding of about half of its fleet.?In a statement, Go First said its bankruptcy filing followed a refusal by Pratt & Whitney, the exclusive engine supplier for the airline's Airbus A320neo aircraft fleet, to comply with an arbitration order to release spare leased engines that would have allowed the airline to return to full operations.
The bankruptcy filing lists Central Bank of India Ltd, Bank of Baroda Ltd, IDBI Bank Ltd, Axis Bank Ltd and Deutsche Bank among Go First's?financial creditors.
The Central Bank of India and Bank of Baroda have an exposure of Rs 1300 crore, respectively under a consortium loan, while IDBI Bank has a smaller exposure of Rs 50 crore, the filing showed.
An official at the Central Bank of India said the bank's total exposure to the airline is Rs 20,000 crore.?In the case of Axis Bank, the airline has a letter of sanction of credit, the filing said, without specifying whether this credit has been availed, the report mentioned.
Go First has also borrowed Rs 1,292 crore under the government's emergency credit scheme introduced during the Covid crisis. As part of the scheme, the government guarantees loans given out by banks to the company.
Also Read:?10 Big Companies That Bounced Back From The Brink Of?Bankruptcy
The cash-strapped airline's total liabilities to all creditors stand at Rs 11,463 crore, the filing shows. This includes dues to banks, financial institutions, vendors and aircraft lessors.
"Currently, the assets of the company are not sufficient to meet its liabilities," the airline said in the filing.
The company has defaulted on payments to operational creditors, including Rs 1,202 crore to vendors and Rs 2,660 crore to aircraft lessors, as per the report.
Go First has already received notices from lessors for termination of aircraft lease agreements and some have started actions against the company to ground or repossess aircraft, the filing said.?Six lessors have also invoked letters of credit issued to them by lenders, it said.
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