Summary
- Go First, India’s troubled low-cost carrier, is facing the possibility of liquidation as it has failed to attract any bidders for a takeover.
- The airline has been struggling with financial, operational, and staffing challenges since suspending operations in May.
- Jindal Power, which initially showed interest in taking over Go First, has decided not to bid after evaluating the airline’s financials.
India’s low-cost carrier, Go First, suspended operations in May of this year and faces even more problems ahead, with reports suggesting it could be left without a bidder. The beleaguered airline hopes for a cash infusion through a takeover to restart operations, but after accessing Go First’s company data, India’s Jindal Power has decided not to bid.
Takeover interest
In May, the crisis-hit airline filed for voluntary insolvency and suspended operations. Since May, the airline has been working towards launching services. However, it has faced many financial, operations, and staffing hurdles, including losing its G8 airline code, further limiting its ability to sell tickets, schedule flights, and route luggage.
In early October, multiple entities pressed interest in reviving Go First, including a foreign airline. In an attempt to attract more revival bids, the deadline was extended countless times, and the Times of India (TOI) reported that three large entities came forward with expressions of interest (EoI), which also included a foreign airline. However, India’s Jindal Power creditors accepted the only company whose expression of interest was to take over Go First.
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Nevertheless, according to a report by Reuters, India’s Jindal Power decided against bidding on Go First after evaluating the airline’s financials. With the deadline to submit bids ending Tuesday, Go First has been left without a bidder. Although the deadline for bids can be extended through an application in court, creditors do not favor doing so. Reuters quotes people aware of the development as saying,
“The EoI was largely to check the valuation of the airline and get access to the company’s data. After evaluation, the company has decided not to put in a bid.”
Indeed, the airline has had difficulty finding potential investors, given the scope of its problems. As the carrier has failed to get a bid successfully, liquidation will be the next step.
What’s next
According to the Reuters report, one of the bankers said the Committee of Creditors would meet on Wednesday to decide the next course of action. The banker added that the airline’s liquidation has become the only viable option as Go First has no bidders.
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Go First still owes $785.6 million to its creditors. The airline’s top creditors include The Central Bank of India, IDBI Bank, Deutsche Bank, and Bank of Baroda. One of the bankers said that the bank is already evaluating a property held as collateral with lenders in the event of liquidation.
Jindal Power’s backing out of a bid for Go First, culminating with recent changes to airline bankruptcy rules in India, has worried creditors. The changes state that bankruptcy protection will not be extended to an airline’s leased aircraft. Moreover, the DGCA, India’s aviation regulator, told the court that the changes to the bankruptcy rules could be applied to pending cases such as Go First’s. Adding to the tension, the airline is already in heavy dispute with its lessors, who want to retrieve the planes and are worried about their general preservation under Go First.
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Source: Reuters