Global aviation body downgrades India in light of Go First case
Global aviation leasing body Aviation Working Group (AWG), which monitors leasing and financial laws on behalf of aircraft manufacturers and and lessors, has put India on a watchlist with a negative outlook. The development follows the National Company Law Tribunal admitting Go First’s insolvency petition and granting it a moratorium, as a result of which lessors who wanted repossession of their aircraft, can’t do the same. Citing the instance, AWG has said that India has failed to comply with international aircraft repossession norms.
SMBC Aviation Capital, which is one of the world’s largest aircraft leasing companies, moved the National Company Law Appellate Tribunal (NCLAT) on May 10, hours after the NCLT admitted Go First’s plea. The matter is being heard by the appellate tribunal and the hearing will continue on Monday. On Thursday, two more aircraft lessors — GY Aviation and SFV Aircraft Holding — moved the appellate tribunal.
Also read: Explainer| Go First in NCLT: What can be expected
The negative outlook by AWG comes under the Cape Town Convention, which is an international treaty on plane repossessions. Under it, it is easier for lessors to take back aircraft if airlines default on payments. However, this has been rendered infructuous with the NLCT’s ruling. India’s score has now been reduced from 3.5 to 3. India joined the Cape Town Convention in 2008.
The development could see domestic carriers paying higher charges for leasing aircraft.
Go First has committed a default of Rs 2,660 crore toward aircraft lessors and Rs 1,202 crore towards its vendors. The total liablities of Go First is Rs 11,463 crore, of which bank dues are of Rs 6,521 crore. Of this, Rs 1,300 has been drawn under the government’s emergency credit line guarantee scheme (ECLGS).
Also read: Go First insolvency: Two more lessors move NCLAT
It has a total fleet strength of 54. Of this, 28 aircraft are grounded due to engine issues with Pratt & Whitney, and 26 are operational. Lessors have moved Directorate General of Civil Aviation demanding deregistration of 45 planes.