At a curtain-raiser recently to announce the next edition of Asia’s largest civil aviation event, Wings India 2024, Rémi Maillard, President of Airbus India and MD of South Asia, raised eyebrows when he described the Mumbai-based low-cost carrier (LCC) Go First’s bankruptcy filing as a “depressing development”. The event was attended, among others, by Jyotiraditya Scindia, Minister of Civil Aviation, the entire top brass of the Ministry of Civil Aviation, and members of the diplomatic corps. Maillard’s assessment was in sharp contrast to the usually bullish forecasts put out by the Toulouse-based plane-maker on India, the world’s fastest-growing aviation market.
Go First, which was operating with an all-Airbus fleet, filed an application for voluntary insolvency with the arbitrator, the National Company Law Tribunal (NCLT) on May 2, and suspended all flight operations, taking the global aviation industry by surprise. Promoted by the over 250-year-old Wadia Group, the airline has cited troubles with engine-maker Pratt & Whitney’s next-generation engines as the reason behind the grounding of its entire fleet. Soon after the news broke, experts told Business Today that the development might create a negative perception of the Indian aviation market. With more than 40 aircraft still on lease to Go First, leasing firms are literally waiting in the wings to repossess their aircraft.
Maillard believes that in the aftermath of the recent developments at Go First, the country’s regulations need to be in sync with international frameworks. “The industry hopes the Government of India will expedite the alignment of domestic laws with international conventions and treaties to ensure that the [aircraft] lessors’ confidence in the market does not dip.” Due to NCLT’s moratorium on Go First’s financial obligations and transfer of assets, lessors are unable to deregister and take back their aircraft. A plea by lessors challenging NCLT’s moratorium was dismissed by the National Company Law Appellate Tribunal (NCLAT). Now, leasing firms are expected to seek an urgent hearing by a vacation bench of the Supreme Court over fears of parts from their aircraft assets being cannibalised by the airline.
“The awfully long duration of the moratorium under the Insolvency and Bankruptcy Code is also in contrast with the provisions of the Aircraft Protocol of the Cape Town Convention. Questions are also being raised about India’s commitments to international obligations under the Convention, while it continues to be one of the riskiest jurisdictions in the world when it comes to aircraft leasing and financing,” says Ajay Kumar, Managing Partner at law firm KLA Legal. Even as this may result in Indian carriers paying a high-risk premium, it also puts a question mark on the country’s ambitions of making GIFT City near Ahmedabad a global aircraft leasing and financing hub.
25/05/2023 Manish Pant/Business Today
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