Go First says can use funds from govt’s emergency credit line scheme to pay its 7,000 employees – ThePrint – Select
New Delhi: Beleaguered low-cost airline Go First has proposed that funds amounting to about Rs 208 crore, for which it is eligible under the central government’s Emergency Credit Line Guarantee Scheme (ECLGS), can be utilised to pay the salaries of its 7,000 direct employees.
Earlier this week, the carrier — which was rebranded to Go First from GoAir in May 2021 — filed for voluntary insolvency proceedings with the National Company Law Tribunal (NCLT).
“…the Company has not drawn balance Rs 208.25 crore being the eligible ECLGS from bank (sic), which can be drawn by the Interim Resolution Professional and can be used for the payment of salaries to the employees,” the airline said in its petition to the NCLT dated 2 May, 2023.
The airline, which is owned by Wadia Group that also runs companies such as Britannia and Bombay Dyeing, has also stated in the petition that it was one of the few profitable carriers from FY 2008-09 until FY 2018-19. It added that it employs 7,000 people directly and 10,000 people indirectly.
Go First has squarely blamed “ever-increasing number of failing engines supplied by Pratt & Whitney” for its decision to file for insolvency proceedings, adding that nearly 50 per cent of its Airbus A320neo fleet has been grounded owing to engine issues. These issues, it said, set the airline back by Rs 10,800 crore in lost revenues and additional expenses.
Due to grounding of aircrafts and the impact of Covid-19 pandemic, the carrier recorded net loss of Rs 1,346.72 crore in FY 2020-21, Rs 1,807.8 crore in FY 2021-22, and Rs 3,600 crore (provisional) in the just-concluded FY 2022-23.
“Nonetheless, the Company tried to stay afloat by seeking funds from banks and financial institutions under the emergency credit line guarantee scheme 3.0 (“ECLG Scheme”)…and entering into deferral agreements with lessors for payment of lease rentals under the aircraft lease agreements,” read the petition.
Union Finance minister Nirmala Sitharaman had in May 2020 announced the ECLGS scheme as an emergency line of credit for businesses affected by the Covid-19 pandemic. In October last year, the government modified the ECLGS to enhance the maximum loan amount eligibility for airlines to 100 per cent of “their fund based or non-fund-based loan outstanding as on the reference dates or Rs.1,500 crore, whichever is lower”.
In its petition, Go First added that its promoters attempted to address severe liquidity issues through an equity infusion and infused Rs 210 crore into the airline in December 2022 and Rs 290 crore in April 2023.
“As of today, a sum of Rs 11,463 Crore (approx.) is owed by the Applicant (Go First) to its creditors which include dues towards, banks, financial institutions, vendors and aircraft lessors. Currently, the assets of the Company are not sufficient to meet its liabilities. Due to such financial stress the essential goods and service providers (including fuel suppliers) are not ready and willing to offer their services and it is becoming increasingly difficult to run the business of the Company as a going concern,” the petition added.
Further, the carrier informed that it had already cancelled 4,118 flights with 77,500 passengers in the last 30 days and will be constrained to cancel further flights dependent on the capacity remaining with the Company.
“Inevitably, the Company will be forced to continue with cancellation of more flights if urgent actions are not taken for its survival and resolution. Furthermore, there is high possibility that the aircraft lessors will continue and expedite their actions for grounding and repossession of the aircraft from the Company,” it said.
It added that if Go First loses possession of its aircraft and the legal right to operate them, then continuance of its business as a going concern will be at stake, which will directly impact the employability of 7,000 direct employees and 10,000 indirect employees, besides debt repayment to creditors such as public sector banks and financial institutions which have significant debt exposure in the company.
(Edited by Amrtansh Arora)
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