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The restructuring will avoid lenders suffering a significant write-down as the loans and debt facilities are currently classified as standard accounts
Go First lenders Central Bank of India, Bank of Baroda (BoB) and Deutsche Bank have declined to provide additional finance immediately to the Wadia Group-promoted airline but are open to a debt recast involving a longer tenure for repayments. The restructuring will avoid lenders suffering a significant write-down as the loans and debt facilities are currently classified as standard accounts.
The lenders have previously refrained from providing new loans, partly due to Go First’s losses and difficulties with bankrupt airlines, Jet Airways and Kingfisher Airlines.
‘History of missing payments’
In more reports, officials associated with the American engine manufacturer Pratt & Whitney (P&W) said the airline has a long history of missing payments. This comes a day after the carrier filed for insolvency. Officials told news agencies that “Go First has a lengthy history of missing its financial obligations to Pratt”.
The engine manufacturer also said in its statement that it will continue to prioritise its delivery schedules for all its customers in compliance with a March 2023 arbitration related to the airline.
Loss higher than group profit
The mounting losses at Go Airlines have become financially unsustainable for the Mumbai-based Nusli Wadia group. In 2021-22, for the first time, the net loss of the air carrier exceeded the combined net profit of listed firms in the group. Go First reported a net loss of Rs 1,804 crore in FY22. In comparison, the group’s four listed companies –Britannia Industries, Bombay Dyeing, Bombay Burmah Trading Corporation, and National Peroxide together reported a combined net profit of Rs 1,305 crore.
Opportunity for rivals
The troubles at Go First has also handed some advantage to other airlines. SpiceJet has put its strategy in motion to revive 25 of its out-of-service planes. The revival expenses will be financed through the Emergency Credit Line Guarantee Scheme (ECLGS) provided by the government and improved cash inflow. The airline has already secured approximately ₹400 crore to facilitate the return of its idle fleet to the skies, which is expected to boost its revenue.