Unable to repossess Go First planes, global aviation body downgrades India

Business Standard

Aviation Working Group (AWG), a global aviation group comprising plane manufacturers and lessors, on Thursday downgraded India to “negative” from “positive” as lessors have not been able to repossess their aircraft from Go First more than seven months after the airline filed for insolvency.

The leasing cost stands as a prominent expense for Indian airlines. With AWG’s downgrade, it is probable that lessors will increase the aircraft leasing rates for Indian carriers.

AWG placed India on its watch list in May after the National Company Law Tribunal (NCLT) barred lessors from repossessing planes from Go First. However, with the Ministry of Corporate Affairs (MCA) issuing a notification on October 3, exempting all plane- and engine-related transactions from the Insolvency and Bankruptcy Code, AWG upgraded India to the “positive” category.

Subsequently, the Directorate General of Civil Aviation informed the Delhi High Court that the MCA notification could be applied retrospectively. “However, hearings at the High Court on lessors’ main writ petitions seeking relief with respect to…deregistration applications remain ongoing with no further judicial action,” the AWG said in its latest notice dated December 6, 2023. Therefore, it has downgraded India again to “negative”.

“This….downgrade is necessary as gaps in CTC (Cape Town Convention) primacy, notably in respect of bankruptcy legislation, have resulted in material non-compliance by India, with substantial losses to relying creditors (lessors),” said the AWG.

In 2008, India signed the CTC, an international treaty providing time-bound remedies for lessors to repossess planes, mitigating their risks. Lessors have been urging India to pass a parliamentary bill to implement this treaty, which will prioritise CTC over insolvency laws. With the MCA notification, the Indian government has officially adopted the treaty.

After Go First airline stopped operating flights from May 3, its lessors had put in applications with the Directorate General of Civil Aviation (DGCA) to repossess more than 40 of the airline’s 54 planes. However, the NCLT on May 10 put a moratorium on all Go First’s assets, barring the lessors from taking their planes back. Multiple lessors of Go First have filed an appeal in the higher tribunal and courts to repossess the planes. The resolution professional recently called for bids but no one put a bid to buy the airline. 

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