Go First financial crisis: Insolvency plea not for loan waiver, says CEO Kaushik Khona

The Wadia group`s low cost airline Go Airlines (India) Limited will look at all legal options, including that of freezing/attaching the Indian assets of the US-based aircraft engine maker Pratt & Whitney, said a top airline official.

He also categorically said the airline filing an insolvency petition with the National Company Law Tribunal (NCLT) is not a ruse to get loan write offs but mainly to safeguard/retain the aircrafts so that the lessors do not repose them.

"We have started the steps for the execution of the award. We have filed a case in the US," Kaushik Khona, Chief Executive Officer told IANS in an interview.

Khona said the airline is also identifying jurisdictions in Japan, Singapore, Europe and the US to file cases against Pratt & Whitney which is refusing to comply with an award issued by an emergency arbitrator appointed in accordance with the 2016 Arbitration Rules of the Singapore International Arbitration Centre (SIAC).

Asked whether the company is looking at filing a case in India against Pratt & Whitney to attach its properties here, Khona said the company will evaluate that option as well.

He said the airline is to get the engines for the 27 aircrafts that are now grounded due to engine faults and legal action will be taken in the jurisdictions where Pratt & Whitney has the engines.

According to Khona, we need the engines and for that the arbitration award has to be enforced and Pratt & Whitney does not have an MRO (maintenance, repair, overhaul) set up in India.

Go Airlines has filed a case in a court in Delaware in the US against Pratt & Whitney to enforce the arbitration award, and Khona said the case will be decided soon.

"That order (arbitration award) directed Pratt & Whitney to take all the reasonable steps to release and dispatch without delay to Go First at least 10 serviceable spare leased engines by April 27, 2023 and a further 10 spare leased engines per month until December 2023, with the objective of Go First returning to full operations and achieving its financial rehabilitation and survival," Go Airlines said.

Dismissing the Pratt & Whitney`s charge that Go Airlines has a lengthy history of missing its financial obligations to it as false, Khona added that if that is the case why would the emergency arbitrator order that the engine maker should not ask for any deposit from the airline and give the engines without any cost.

On the issue of approaching the NCLT, Khona said it is not an insolvency petition but a petition for resolution as the business is viable.

Khona said the aircraft lessors were taking an irrational action of repossessing the aircrafts and approaching the NCLT is the only way to protect the assets as we will seek moratorium under the Insolvency Bankruptcy Code (IBC).

He said under this process, the airline can retain its assets and come back to normal levels as it is a viable business.

Khona said there is no pressure from the bankers as all the facilities are more or less working capital and non funded. The company has to pay only the interest and the interest rates are also not so high.

In the last six months the banks have sanctioned Emergency Credit Line Guarantee Scheme (ECLGS) which have a two year moratorium and there is no repayment pressure except for Rs 50 lakh which the company got in 2021 where payment has started, Khona said.

Adding further he said, all the assets are charged to the bank and on the top of it, the promoters have given 94 acre land in Bombay and Thane as security the value of which two years back was about Rs 3,000 crore. The filing of the NCLT petition is not aimed at the bankers.

Terming a news report in a leading financial daily that the airline has asked the bankers to write off a portion of the loan as wrong, Khona said the airline has not approached any bank to write off the loan and "we have no such intention".

He said the bankers are being updated on the situation and in the last one year there had been more than 12 consortium meetings and the company promoters also met the bank Managing Directors several times in the last three months.

The decision to file the petition with NCLT had to be taken in three days as the aircraft lessors were taking coercive action to take over the aircraft.

The airline has 54 aircrafts out of which 27 are operational and 27 are grounded due to engine problems. As of now no aircraft has been deregistered and taken back by the lessors, he said.

On the issue of defaults, a petition under Section 10 can be made only if there is a default. The airline had defaulted with creditors, lessors and others. As regards the bankers, interest to be debited on May 2 became overdue. However, the account is not an NPA, Khona said.

On the question of low cost airline a viable business proposition as several airlines have crash landed, Khona said Go Airlines has been profitable since 2009-10 till 2019-20. Only from January 2020 the Pratt & Whitney engine problem aggravated and the company faced problems as an airline has a huge fixed cost.

According to him, only low cost airline business could be profitable and Go Airlines has the lowest cost structure till December 2022. Our costs were either at par or better than the industry leader. Go Airlines have been operating our aircrafts for 14 hours a day.