Go First revival in further jeopardy as the airline may lose airport slots, international flying rights

The Indian aviation regulator, the Directorate General of Civil Aviation (DGCA), is looking to permanently take away the domestic airport slots and international  flying rights of the troubled Go First, signalling that the airline may not be able to take off again, executives aware of the ongoing developments said.

“It’s been a year since the collapse of Go First. Per the Slot Allocation Guidelines, 2013, since the airline has not utilised any of its airport slots in the last year, it loses its historic precedence to domestic airport slots,” a senior government official aware of the situation told Moneycontrol.

He added that Go First’s domestic airport slots have already been allocated to other airlines, and its international flying rights will also be redistributed soon.

In India, airlines can claim a right to an airport slot if they comply with the annual slot adherence norms, which means they run at least 80 percent of the departures committed to the regulator.

A second government official pointed out that while the government had temporarily allocated the flying rights of Go First in the Winter Schedule for 2023 and Summer Schedule for 2024, the allocations will be made permanent by the end of the month.

“To cater to the rising domestic and international air traffic demand, the domestic airport slots and international flying rights of Go First have  already been allocated temporarily to other airlines,” the second government official said.

An executive involved in the bankruptcy proceedings of the airline told Moneycontrol that losing Go First’s historic precedence to domestic slots, and flying rights to international destinations like Oman, Dubai, Thailand, Abu Dhabi, and Singapore is expected to impact the valuation of the carrier even further.

Executives working with the airline who are aware of the ongoing  discussions between Go First Resolution Professional Shailendra Ajmera and the Committee of Creditors (CoC), said that the CoC values the assets of Go First at around Rs 3,000 crore.

Go First’s key remaining asset is a 94-acre land parcel in Thane that the Wadia Group had given as collateral to the banks. The land is valued at approximately Rs 3,000 crore. Apart from the land, the airline’s assets also include an Airbus training facility in Mumbai, and its headquarters.

Emails sent to Go First remained unanswered at the time of publishing. A separate email sent to lenders also remained unanswered till the time of filing the copy.

“The CoC and the potential bidders have hit a roadblock in  the valuation of the airline’s remaining assets. Losing more assets is not a good sign for the revival of Go First,” an executive said.

Go First’s flying rights and domestic airport slots in India were protected after the airline declared bankruptcy in May 2023, and the National Company Law Tribunal (NCLT) imposed a moratorium on the airline’s assets.

On April 26, 2024, the Delhi High Court directed the DGCA to process the de-registration applications for the aircraft leased by the airline within five working days.

By May 1, the DGCA  had approved the de-registration of most of Go First’s 54 aircraft, which multiple lessors had sought after the airline got grounded in May 2023.

Airport slots and flying rights

An airport slot is a specific period of 5-20 minutes during which an aircraft can take off or land. Slot timings can impact an airline’s yields, revenues, efficiency, and profitability. Given the high demand for early-morning and late-evening flights, slots at these times generate better yields for airlines.

The aviation calendar has two schedules. The summer schedule begins on the last Sunday of March and ends on the last Saturday of October. The winter schedule begins on the last Sunday of October and ends on the last Saturday of March.

International flying rights are allotted on a bilateral and reciprocal basis by the governments of two countries. Airlines cannot operate more flights than they are allotted.

According to former Go First officials, before its collapse, the airline was allotted around 10,000 seats per week to Muscat, 8,000 seats per week to Thailand, 3,000 seats to Malaysia, 9,000 to Abu Dhabi, 6,000 seats to Dubai, and 1,200 seats to Singapore.

Mukesh Chand, Senior Counsel at Economic Laws Practice, said “When an airline in India undergoes insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) 2016, the fate of its flying rights can vary depending on several factors, including the specific circumstances of the case, applicable regulations, and the decisions of the relevant authorities.”

According to Chand, in some cases the the airline, can continue functioning under the supervision of the resolution professional or lenders, thus it could maintain its existing routes and flight schedules, subject to regulatory compliances.

He said “Since, Go Air has not been flying its right will be under suspension and the situation will be considered by DGCA after resolution of insolvency subject to the airline complying with the Aircraft Rules and satisfying the safety standards.”

Jet Airways

The Murari Lal Jalan-Kalrock Capital consortium, who had won the bid for the insolvent Jet Airways, had faced a similar situation in 2021, when the DGCA and Ministry of Civil Aviation (MoCA) had told the NCLT that the airline cannot claim `historicity’ for slots at airports, and the allocations will be based on existing guidelines.

In that case, the NCLT had clarified that “slots can be allotted only to an airline in operation with a valid air operating licence, and operating flights from a particular airport.”

The mechanism of allotment of slots is a very complex and dynamic process on which the entire flight schedule of an airport depends. Not a single slot is left idle, and once vacated by an airline, it is reassigned to another to ensure that  slots are used and the airport does not have idle capacity, the NCLT order explained.

Last month, the Delhi High Court had directed that all maintenance of the grounded Go Air aircraft will be undertaken by the lessors and their authorised representatives up to and until the time the aircraft are de-registered and `exported’ (taken back by the lessor), in pursuance of rule 32A of the Aircraft Rules.

The story so far

Timeline of GoFirst Airlines insolvency process

Timeline of GoFirst Airlines insolvency process

In its bankruptcy filing, GoFirst had blamed its financial woes on the `faulty’ engines of the US-based Pratt & Whitney, claiming it was forced to ground 28 of its 56 planes.

Go First, founded in 2005 and formerly backed by the Wadia Group, filed for insolvency on May 2, 2023, and ceased flights the following day.

The airline’s total liabilities to all its creditors amount to about Rs 11,463 crore, including dues to banks, financial institutions, vendors, and the aircraft lessors.

The Delhi High Court’s April 26 ruling overturned the DGCA’s communication of May 2023 deferring the lessors’ de-registration applications, as Go First had entered a moratorium period.

Back in November 2023, the DGCA had filed an affidavit in Delhi High Court clarifying that the notification exempting aviation leases from moratorium under the Insolvency and Bankruptcy Code, 2016, should apply to pending cases as well.

Go First’s insolvency plea was accepted by the NCLT on 10 May, 2023, initiating a moratorium period.

GoFirst owes Rs 6,521 crore to lenders, including Bank of Baroda, Central Bank of India, Deutsche Bank, and IDBI Bank, according to the information provided by the airline. Central Bank of India had the highest exposure of Rs 1,987 crore, followed by Bank of Baroda at Rs 1,430 crore, Deutsche Bank at Rs 1,320 crore, and IDBI Bank at Rs 58 crore.

On April 8, 2024, NCLT had granted a 60-day extension to Go First to complete its corporate insolvency resolution process, considering stakeholder interests.