In a dramatic turn of events, the Committee of Creditors (CoC) of the Indian airline Go First (GOW, Mumbai International) has decided to liquidate the insolvent airline. The application for liquidation is to be filed on August 5 with the National Company Law Tribunal (NCLT), a special bankruptcy court. This decision was made after the purchase offers received did not meet expectations.

The CoC's decision marks the end of a turbulent period for Go First, which ceased operations in May 2023. The airline was facing significant financial problems at the time, exacerbated by technical difficulties with Pratt & Whitney engines. These problems resulted in a large part of the fleet being grounded, further worsening an already precarious financial situation.

Futile sales efforts

A sales strategy was initiated in early 2024, which resulted in two formal offers: one from a consortium comprising Ajay Singh, promoter of SpiceJet (SG, Delhi International), and Nishat Pitti of EaseMyTrip, and another from Sharjah-based Sky One. After the CoC raised concerns about the structure and upfront costs of the offers, Singh and Pitti's consortium withdrew its offer in May. This came after a Delhi High Court ruling that allowed lessors to deregister and export their aircraft leased to Go First, leaving Sky One as the only potential buyer.

Go First's financial situation is dire. The airline's administrator accepted creditor claims totaling Rs 65,21 billion (US$780 million). The largest creditors include several banks, including the Central Bank of India, Bank of Baroda, IDBI Bank and Deutsche Bank. These banks are represented in the CoC and have claims of Rs 19,34 billion (US$231 million), Rs 17,44 billion (US$208 million) and Rs 750 million (US$9 million), respectively.

Hope for compensation

A glimmer of hope for creditors may be a lawsuit filed by Go First against engine manufacturer Pratt & Whitney at the Singapore arbitration tribunal. The airline is hoping to receive around USD 1 billion in compensation. The CoC believes that pursuing this lawsuit is the best way to recover the money owed.

The NCLT recently granted Go First's administrator a two-month extension to sort out the airline's fate by either selling it or liquidating it. That deadline expired on August 3, and the NCLT had said no further extensions would be granted. The decision to liquidate means creditors will now have to hope to recover some of their claims through the sale of assets or through the compensation suit they are seeking.

The competition and the industry

The collapse of Go First comes in a challenging environment for the Indian aviation industry. While established airlines such as Air India and IndiGo are consolidating their market positions, smaller players such as SpiceJet are struggling financially. Competitive pressures and the need to invest in modern and efficient aircraft pose additional challenges.

For Go First, the Delhi High Court's decision allowing lessors to withdraw their aircraft was a major blow. The uncertainty over aircraft availability and the operational challenges this posed made it difficult to convince potential buyers.

The decision to liquidate Go First is a tragic end for an airline that was once considered a promising player in the Indian aviation industry. Creditors now hope that the compensation claim they are seeking against Pratt & Whitney can offset some of the losses. The events surrounding Go First highlight the challenges and risks that airlines face in a competitive and constantly changing market.