Indian ultra low-cost airlines, Go First has announced that it has filed application for bankruptcy as the company is unable to fulfill its financial obligations. The Mumbai-based airline has been experiencing a significant cash shortage for the last few months due to multiple factors, including grounded aircraft caused by engine problems and supply chain issues.
In a statement, the airline company said that its operations have become untenable due to Pratt & Whitney’s failure to comply with the emergency arbitrator’s award by providing spare leased engines. Moreover, the company anticipates further engine failures in the next 3–4 months, exacerbating its already dire financial situation.
Severe Debt Exposure of Banks
In the bankruptcy application, Go First Airlines revealed that it owes financial creditors a total of ₹65.21 billion. Reports suggest that multiple banks and financial institutions have severe exposure to Go First Airlines’ debt.
Central Bank of India Ltd, Bank of Baroda Ltd, IDBI Bank Ltd, Axis Bank Ltd, and Deutsche Bank are among the financial creditors listed. Notably, Central Bank of India Ltd has a significant exposure to Go First’s debt.
The company has stated that as of April 30, Go First Air had not yet defaulted on any of its dues to financial creditors. However, given the current financial circumstances of the airlines, it is highly likely that such defaults would occur in the near future.
As per the filing, the Central Bank of India and Bank of Baroda hold an exposure of 1300 rupees each under a consortium loan, whereas IDBI Bank’s exposure is comparatively lower at 50 crore rupees.
According to a Reuters report, an official from the Central Bank of India has revealed that the bank’s overall exposure to the airline amounts to 2000 billion rupees.
A recent CNBC report has revealed that Deutsche Bank, headquartered in Frankfurt, Germany, holds an exposure of 1320 crore Indian rupees in light of Go First Airlines’ recent bankruptcy filing. Meanwhile, Axis Bank’s exposure to the airline’s debt is relatively lower, at 30 crore Indian rupees.
Go First Airlines’ Total Debt to Various Entities
According to reports, Go First Airlines owes a total of 11463 crore Indian rupees to a variety of financial institutions, banks, vendors, and aircraft lessors. Moreover, the airline has already defaulted on its debt repayment to the tune of 1202 crore rupees owed to vendors and 2660 crore rupees owed to aircraft lessors.
As a result of the default on payment to operational creditors and aircraft lessors, these entities have taken necessary measures to terminate agreements and initiate legal action to repossess their aircraft from Go First Airlines. Additionally, six creditors have reportedly utilized the letters of credit issued to them by lenders.
