Go First receives Rs 400 crore interim funding from lenders, DGCA approval awaited

In a significant development aimed at keeping Go First, the troubled Indian airline, afloat, the company’s lenders have granted approval for interim funding of around Rs 400 crore, according to Moneycontrol, citing sources familiar with the matter. The Committee of Creditors (CoC), which includes the Central Bank of India, Bank of Baroda, Deutsche Bank, and IDBI Bank, voted in favor of the additional funding request, signaling a crucial step in the ongoing efforts to revive the struggling airline.

Lenders pass the ball to DGCA’s Court

A top banker, who requested anonymity, disclosed to Moneycontrol that the lenders approved the funding based on Go First’s business plan to support the revival of operations. Another source confirmed the approval, stating that the Committee of Creditors granted the interim finance request following a voting process held on Saturday. The cited sources also revealed that the lenders might be open to providing additional contingency funding in the future, if necessary, for specific events.

Go First, previously known as GoAir, currently owes Rs 6,521 crore to its lenders, with Central Bank of India having the highest exposure at Rs 1,987 crore, followed by Bank of Baroda at Rs 1,430 crore, Deutsche Bank at Rs 1,320 crore, and IDBI Bank at Rs 58 crore. The approval of the interim funding offers a glimmer of hope for the beleaguered airline as it seeks to overcome its financial challenges.

The next crucial step in the process lies with the Directorate General of Civil Aviation (DGCA), which is reviewing an application Go First submitted to resume operations. The airline requires the regulatory authority’s clearance to restart flights and begin selling tickets. Sources cited by Moneycontrol indicated that Go First plans to commence operations on July 1, covering 78 routes with a fleet of approximately 22 aircraft. All stakeholders eagerly await the DGCA’s decision after completing fleet inspections and other necessary checks.

Indian aviation and the Insolvency Issue

The financial crisis began when the airline filed an application for voluntary insolvency resolution proceedings before the National Company Law Tribunal (NCLT) on May 2. This move came after the Wadia Group-owned carrier announced a temporary suspension of flight operations on May 3 and 4, citing a severe fund crunch. The airline attributed its financial difficulties to grounded Airbus A320neos equipped with allegedly faulty Pratt & Whitney engines. However, Pratt & Whitney denied these claims, calling them baseless.

Moneycontrol cited Go First’s CEO, Kaushik Khona, as saying that the airline had grounded more than half of its fleet due to the non-supply of engines by Pratt and Whitney. The financial strain Go First faces is the latest crisis in India’s fiercely competitive airline industry. Following operational failures, lenders have previously encountered challenges in recovering funds lent to other airlines, such as Vijay Mallya-promoted Kingfisher and Jet Airways.

While lenders have managed to recover a significant portion of the money lent to Kingfisher by attaching the assets of its promoter, Vijay Mallya, the fate of Jet Airways remains uncertain as attempts to rescue the airline are ongoing in the bankruptcy court. Recently, the NCLT granted additional time to bidders of Jet Airways to fulfill their dues.