Go Airlines looking to attach Pratt & Whitney India assets?
The Wadia group's low-cost airline Go First is evaluating its legal options, including attaching the Indian assets of US-based aircraft engine maker Pratt & Whitney
The Wadia group's low-cost carrier Go Airlines (India) Limited will look at all legal options, including that of freezing/attaching the Indian assets of the US-based aircraft engine maker Pratt & Whitney, said a top airline official.
He also categorically said the airline filing an insolvency petition with the National Company Law Tribunal (NCLT) is not a ruse to get loan write-offs, but mainly to safeguard/retain the aircraft so that the lessors do not reposess them.
"We have started the steps for the execution of the award [to replace faulty engines with spare parts]. We have filed a case in the US," Kaushik Khona, Go's chief executive officer, told IANS in an interview.
Khona said the airline is also identifying jurisdictions in Japan, Singapore, Europe and the US to file cases against Pratt & Whitney, which is refusing to comply with an award issued by an emergency arbitrator appointed in accordance with the 2016 Arbitration Rules of the Singapore International Arbitration Centre (SIAC).
Asked whether the company is looking at filing a case in India against Pratt & Whitney to attach its properties here, Khona said the company will evaluate that option as well.
He said the airline is to get the engines for the 27 aircraft that are now grounded due to engine faults, and legal action will be taken in the jurisdictions where Pratt & Whitney has the engines.
According to Khona, Go First needs the engines to be able to operate, and for that, the arbitration award has to be enforced. Pratt & Whitney does not have an MRO (maintenance, repair, overhaul) setup in India.
Go Airlines has filed a case in a court in Delaware in the US against Pratt & Whitney to enforce the arbitration award, and Khona expects the case will be decided soon.
"That [arbitration award] directed Pratt & Whitney to take all the reasonable steps to release and dispatch without delay to Go First at least 10 serviceable spare leased engines by April 27, 2023, and a further 10 spare leased engines per month until December 2023, with the objective of Go First returning to full operations and achieving its financial rehabilitation and survival," Go Airlines said.
Dismissing Pratt & Whitney's charge that Go Airlines has a lengthy history of missing its financial obligations as false, Khona suggested that if that were the case, the emergency arbitrator would not have ordered the engine maker to give the engines without requesting any deposit to cover costs.
On the issue of approaching the NCLT, Khona said it is not an insolvency petition but a petition for resolution, as the business is viable.
Khona said the aircraft lessors were taking an irrational action of repossessing the aircraft, and approaching the NCLT is the only way to protect the assets. Go First is seeking a moratorium under the Insolvency Bankruptcy Code (IBC). Khona said that under this process, the airline can retain its assets and come back to normal operations as a viable business.
Khona said there is no pressure from the bankers as all the facilities are more or less working capital and non-funded. The company has to pay only the interest, and the interest rates are also not so high.
In the last six months, the banks have sanctioned an Emergency Credit Line Guarantee Scheme (ECLGS), which has a two-year moratorium and there is no repayment pressure except for the Rs 50 lakh which the company got in 2021, for which payment has started, Khona said.
He added that all the assets are charged to the bank and, on top of it, its promoters have given 94 acres of land in Bombay and Thane as security, the value of which two years back was about Rs 3,000 crore. The filing of the NCLT petition is not aimed at the bankers, Go First maintains.
Terming a news report in a leading financial daily that the airline has asked the bankers to write off a portion of the loan as wrong, Khona said the airline has not approached any bank to write off the loan and "we have no such intention".
He said the bankers are being updated on the situation and, in the last one year, there had been more than 12 consortium meetings and the company promoters also met the bank managing directors several times in the last three months.
The decision to file the petition with NCLT had to be taken in three days as the aircraft lessors were taking coercive action to take over the aircraft.
The airline has 54 aircraft, out of which 27 are operational and 27 are grounded due to engine problems. As of now, no aircraft has been deregistered and taken back by the lessors, he said.
On the issue of defaults, a petition under Section 10 can be made only if there is a default. The airline had defaulted with creditors, lessors and others. As regards the bankers, interest to be debited on May 2 became overdue. However, the account is not an NPA (non-performing asset), Khona said.
On the question of whether low-cost airlines can be a viable business proposition, as several airlines have 'crashed', Khona said Go Airlines has been profitable since 2009–10 till 2019–20. Only from January 2020 did the Pratt & Whitney engine problem get aggravated, so that the company faced problems as an airline has a huge fixed cost.
According to him, only low cost airline business could be profitable and Go Airlines has the lowest cost structure till December 2022. "Our costs were either at par or better than the industry leader," said Khona, adding, "Go Airlines have been operating our aircraft for 14 hours a day."
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