Go!! Gonnne

The company was founded on 4^th November 2005 by Jeh Wadia. Company has slogan of ‘You Come First’. Company is planning to list in Indian Stock market and planning to rise 36 billion from the primary market and also it had filed DRHP with SEBI. It has 5^th largest Arline company in the India after followed by Air Asia India and has around 7% of market shares. It has more than 53 plane in services and it planning to order more 89 planes. Then way they want to become insolvent and why they filed Voluntary Insolvency Resolution before NCLT? We will discuss all those thing and other matters related to Go Airline.

 

Recently, Go First Airlines which is formally known as GoAir Airlines filed and Voluntary Insolvency Resolution before NCLT (National Company Law Tribunal) under section 304 of the Company Act 2013 and under the section 59 of the IBC (Insolvency and Bankruptcy Code of India 2016).

As per the IBC if any corporate person is not able to pay dues toward its creditor, then they can file the application to NCLT regarding his bankruptcy or NCLT or Canter Government or Creditor also made an application and start the insolvency proceed.

 

In this case the company it self file the application for its insolvency due not able of paying future debts to its creditor or toward its loan instalment of bank. Although, till 30^th April 2023 the company is sounded good and paid all its past dues and claim and instalment of the loan.

But now the management of the company claims that from now they are not able to pay the instalment and dues of creditors.

 

Now, lets look the analysis of financial statement of the company and let’s look at the amount of loan and dues of pending toward its bank and creditors respectively. As per the financial statement filed by the company along with its application to NCLT company has around 11000 Cr dues, which are pending to pay. 

And as per the filing application company is only able to setoff or pay 30% of the dues form its assets and receivables.

 

Here are some majored companies whose amount are in the liability side list of the Go First. When we talk about the bank’s dues Central Bank of India and Bank of Baroda is on the top with 13 billion Rupees, while IDBI bank has smaller exposure of 500 million.

Company borrowed 12.92 billion rupees from the government's emergency credit scheme introduced during the Covid crisis. And not this but it had taken loan form Deutsche bank a German bank with amount of 1320 cr.

Apart form this bank loan it has huge number of dues outstanding toward the creditors and other related person. Like as the company has defaulted on payments to operational creditors, including 12.02 billion rupees to vendors and 26.60 billion rupees to aircraft lessors.

For the past some time company also not able to pay his employees salary on timely basis. Company has also dues to its petrol supplier, which is Indian Oil Corporation with amount of 50 Cr.

Now, the question is how can the company will pay the dues and loan.? For more about the process of insolvency refer this Article - The process of Paying Dues

 

There is no chance to pay the amount to equity share holder. But here there is more than 300 employees whose salary are pending. The amount is not sufficient to meet the dues of creditor or bank, so, here there is also no any question on receiving payment by employees.

But that is the not only one thing secured creditor and the banker are also not eligible to get 100% payment on its dues. The company’s assets and cash are sufficient to meet only 30% payment.

 

There is a question on its exitance, if company has nice market share and good market position in India airline market, then what was the circumstance are occur and the company need to file the insolvency?

The Arline industries are totally depending on its vendor. Because there is not possible to bay the heavy costed airline plane and to manage those planes. Also, with it they are depend on the flue company.

Go First has one vendor who is Pratt & Whitney engines. This company are engaging in manufacturing and maintenance of aircraft engine. Go First has a contract with this company to provide engine for its aircraft.

But due to some condition Pratty & Whitney has been not fulfil the contract and toward Go First aircraft are grounded with 50% of its total. And it incurs the costing it 108 billion rupees ($1.32 billion) in lost revenues and additional expenses.

Pratt & Whitney said in a statement to Reuters that it was "committed to the success of our airline customers, and we continue to prioritize delivery schedules for all customers." But now Go First made an arbitration in US Federer Court with amount of around 8000 Cr rupees.

But till that judgment company has not sufficient cash flow to meet its day-to-day activity and it need. In result of non-availability of cash flow, on 3^rd April 2023 company announce the cancelation of all its flight on next 3 days. And later on, it announces of not taking off all its flight till 9^th April 2023.

Due to this decision of company, thousands of its passenger are facing difficulties. Although company announce the refund policy for calming of refund on flight ticket, but now passenger need to pay high amount of far to travel in last minute of cancelation.

 

Due to Go First insolvency application, other aviation industries company has indirect benefit. From the date of Go First announcement all the other aviation company’s share are starting moving up word side.

 

The company has heugh market share and good amount of market position but still it gone for Insolvency.