Indian banks walk back commitment to fund Go First's restart

Banks have backtracked on a previous commitment to provide additional funding to Go First (Mumbai International), according to Reuters. The banks, all with substantial loans placed at the now insolvent low-cost carrier, say the likelihood of the airline resuming services has substantially decreased.

In June, ch-aviation reported that the banks, namely the Bank of India, Bank of Baroda, IDBI Bank, and Deutsche Bank, had approved in principle finance of INR4.25 billion rupees (USD51 million) to relaunch the airline. At the time, there were some signs, including support from lenders and India's Directorate General of Civil Aviation, suggesting that Go First's prospects of relaunching were reasonable.

However, a sustained legal campaign by lessors to repossess aircraft and engines, along with changes to India's bankruptcy laws, which will bring it in line with the Cape Town Convention and make it easier for lessors to reclaim their assets, now suggest the chances of Go First restarting have reduced.

"When the funding was approved, there was some visibility about the airline restarting operations," a unnamed banker told Reuters. "Now the situation is quite different and the future is bleak."

The DGCA has recently told the Delhi High Court that the changes to India's bankruptcy laws will exempt aviation assets from any repossession bans, like those implemented by the National Company Law Tribunal since Go First ceased flying in April. Go First leases all of its aircraft stock, and ch-aviation has reported that lessors are lining up to take back every aircraft placed at the airline, with multiple cases active in the Delhi High Court and National Company Law Tribunal.

"It seems as though Go First's fate is sealed," the banker said. "With the DGCA's stance, restarting operations appears highly unlikely, as the aircraft will likely be repossessed."

Go First's creditors, including the banks, are owed around INR65 billion (USD781 million). The airline owes the Central Bank of India INR19.87 billion (USD238.7 million) and the Bank of Baroda INR14.3 billion (USD171.8 million). To date, the banks had argued the best chance of recouping their money was restarting the airline. They say the lifting of repossession bans should not to retrospective court orders, an argument now underway in the Delhi High Court. However, the widespread view is that the banks will be hard-pressed to win orders to keep the aircraft in India.