The two competing bidders for Go First (GOW, Mumbai International) have submitted bids with insufficient upfront payments to cover the costs of the insolvency administration process, let alone any other debts, according to CNBC-TV18. Meanwhile, the airline's administrator is fighting off contempt charges as lessors pursue him for alleged failure to undertake aircraft maintenance and ignoring court orders to do so.

Go First suspended operations in May 2023 and shortly after entered into the Corporate Insolvency Resolution Process (CIRP). That process has reportedly accrued costs of INR6 billion rupees (USD72.4 million). In addition, creditors, including banks and lessors, have submitted claims of INR65.21 billion (USD787 million). However, as in many other jurisdictions, insolvency administration costs are placed at the front of the payment queue in India.

But the news outlet says one of the two bidders, Sharjah-based Sky One, has proposed an upfront payment of INR4.1 billion (USD49.5 million) while the second bidder, the Ajay Singh-Nishant Pitti consortium, has offered an upfront payment of INR2.9 billion (USD35 million). Neither fully covers the costs of the insolvency administration, which reportedly puts the bids' viability in doubt.

Both bidders are counting on a lawsuit against Pratt & Whitney going Go First's way and intend to use the proceeds to settle the airline's debts. When it collapsed, approximately 25 of its aircraft were out-of-service due to Pratt & Whitney engine issues. In its initial insolvency filing, the airline savaged the manufacturer's "defective and failing engines" for causing a cash-flow crisis. It sued for INR80 billion (USD965.7 million) in damages at the Singapore International Arbitration Centre.

Both Sky One and the Singh-Pitti consortium have budgeted to receive around USD1 billion from the lawsuit. Sky One has proposed handing over 25% of the proceeds to settle existing Go First debts, while Singh-Pitti has offered to repay creditors in full from the lawsuit's proceeds. When filing the insolvency petition, then-CEO Kaushik Khona said he expected around USD1.1 billion in damages.

But the lack of upfront cash from either the Sky One or Singh-Pitti bids has caused some concern among Go First's Committee of Creditors (CoC), which includes four banks owed a combined INR37.53 billion (USD453 million). They will not get any cash from the proposed upfront payments under the current offers, and with no fixed timeline for the resolution of the lawsuit, do not know when they will see any money.

CNBC-TV18 reported that the CoC had asked Go First's administrator, Ernst & Young partner Shailendra Ajmera, to start negotiations with both bidders to amend their proposed packages to include a bigger upfront payment. Under India's insolvency laws, the administrator has until April 4 to find and lock in a buyer for the airline.

Unattended maintenance

Meanwhile, Ajmera is again under fire from lessors, with several arguing in the Delhi High Court on March 1 that he should be charged with contempt for failing to undertake necessary maintenance on aircraft and ignoring earlier court orders to do so.

DAE (SY22) 13 Ireland Designated Activity Company was joined by several other lessors, including ACG Aircraft Leasing Ireland Ltd (an Aviation Capital Group SPV), in seeking the contempt petition. The lessor's counsel argued that Ajmera had not complied with previous court orders requiring him to maintain the aircraft and supply the lessors with maintenance records.

According to India's Mint outlet, Diwakar Maheshwari, appearing for Ajmera and Go First, said they had "partially complied" with earlier court orders by providing maintenance documents to all lessors and initiating steps for maintenance. Maheshwari said the resignation of the previous CAMO and a lack of manpower caused the delays. He added that an agreement had been reached with lessors to use a third party for maintenance.

Last year, a National Company Law Tribunal (NCLT) ruling prevented lessors from repossessing and exporting aircraft placed at Go First. The airline's fleet was entirely comprised of leased planes, and ch-aviation has previously reported that all are in line to leave India when legally allowed. In the interim, lessors have struggled to access and have their assets adequately maintained. A July 5, 2023, court ruling gave Ajmera control of and responsibility for maintenance. Last week, the lessor's counsel stood by the contempt application, saying Ajmera should not have argued for control and responsibility if he did not have the resources to do the job properly.

Justice Tara Vitasta Ganju declined to grant the lessor's contempt petition, instead giving Amjera one week to decide whether he wants to retain maintenance responsibility or hand it back to the lessors.

The matter returns to court on March 7.