According to a report in Financial Express, Wadia Group, the parent company of GoFirst, has proposed a one-time settlement to banks as a potential solution to the airline’s ongoing problems.
This settlement would require both banks and GoFirst to make concessions.
The airline, which recently filed an application for insolvency resolution in the National Company Law Tribunal (NCLT), has announced the suspension of air services from May 3 to 5 due to financial constraints.
GoFirst cited a lack of funds to continue operations, with banks having outstanding dues of over Rs 65,000 crore.
GoFirst Files Insolvency Petition
Financial Express has reported that GoFirst has initiated insolvency proceedings by filing an Insolvency and Bankruptcy Code (IBC) petition under Section 10 instead of Sections 7 and 9.
Legal experts quoted in the news suggest that since the company has not defaulted on its loan, it is allowed to propose a resolution plan.
The NCLT has commenced insolvency proceedings, and the news is yet to be verified by Moneycontrol.
GoFirst CEO Confirms Insolvency Petition
Kaushik Khona, CEO of GoFirst, has acknowledged the airline’s insolvency petition and stated that efforts are underway to seek resolution.
He mentioned that the Wadia Group will disassociate from the company, emphasizing that every possible measure is being taken to overcome the current situation.
Khona also informed the employees about the advantages of Section 10 of the IBC for seeking relief.
The Civil Aviation Ministry has stated that the government will not intervene in the matter as it is sub judice in the NCLT.
NCLT Hearing set for May 5
The NCLT will hear GoFirst’s insolvency petition on May 5. The airline has outstanding loans from various banks, including Bank of Baroda, Central Bank of India, Deutsche Bank, and IDBI Bank, totaling Rs 6,521 crore.
Additionally, GoFirst has liabilities of Rs 11,463 crore towards vendors.
The airline recently faced operational challenges due to the non-supply of Pratt & Whitney engines, leading to financial difficulties.
SpiceJet Seeks to Raise Funds
Budget carrier SpiceJet is making efforts to raise a debt of Rs 400 crore to revive 25 of its aircraft.
This move aims to address the void left by GoFirst’s bankruptcy. SpiceJet plans to utilize the government’s Emergency Credit Line Guarantee Scheme (ECLGS) and improve its cash flow to resume operations.
Ajay Singh, Chairman and MD of SpiceJet, believes that this step will allow the company to capitalize on the upcoming peak travel season.
Wadia Group is majority owner of Go First Airlines, which recently renamed it self from old name GoAir. But the recent events does not show any effect of it. Go First is having crisis from past 2 years. With less planes and more routes to cover, it was very difficult and hectic for them to do regular flight operation.
Nail in coffin came with refusal of Pratt and Whitney to supply any more engines. At least not soon. With the ongoing Go First Crisis, Wadia group has come up with one time settlement plane. But that doesn’t seem to be the option to go for. we have to wait and see what happens to Go First.
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