SpiceJet, Busy Bee raise Go First bid to Rs. 1,800cr
A consortium spearheaded by Ajay Singh, head of SpiceJet, and Busy Bee Airways has upped its bid for Go First to Rs. 1,800 crore, Moneycontrol reported. The previous joint bid stood at Rs. 1,600 crore. This move comes in response to the Committee of Creditors (CoC) hitting a roadblock in valuations and discounts, calling for higher bids from interested parties. The consortium has also suggested an increase in its initial payment from Rs. 290 crore to approximately Rs. 500 crore.
Initial bid and insolvency resolution costs
Go First had voluntarily filed for insolvency in May last year. It recently attracted two acquisition bids on February 26. The first bid was jointly put forth by Ajay Singh and Nishant Pitti, the biggest shareholder of Busy Bee Airways, while Sky One Airways owned by Jaideep Mirchandani submitted the other. However, neither party proposed a significant initial payment to cover the estimated Rs. 600 crore insolvency resolution costs for the airline.
Go First's debt crisis and potential liquidation
Go First is indebted to lenders including Bank of Baroda, Central Bank of India, Deutsche Bank and IDBI Bank to the tune of Rs. 6,521 crore. In December 2023, due to the inability to resolve its debt crisis, the airline's lenders voted on a proposal to liquidate it. The CoC estimates Go First's assets at around Rs. 3,000 crore which would be distributed among customers, travel agents, banks and other lenders post-auction.
Restarting Go First is a long road ahead
If the resolution plan for Go First gets the green light, the airline will still face hurdles in resuming operations due to a depleted workforce. The successful applicant would require at least 1,000 personnel, including licensed staff such as pilots, to kickstart operations with a fleet of up to 10 aircraft. However, Go First presently has nearly 300 employees left on its payroll and most of its senior management has already exited the airline.
Go First's remaining assets and other creditors
Go First's primary asset is a 94-acre land parcel in Thane, valued at approximately Rs. 3,000 crore. The airline also owns an Airbus training center in Mumbai and its headquarters. In addition to the banks, the airline also owes around Rs. 2,000 crore to aircraft lessors, Rs. 1,000 crore to vendors, Rs. 600 crore to travel agents and Rs. 500 crore to customers awaiting refunds. The total liabilities are estimated to be around Rs. 11,000 crore.
Go First's insolvency and impact on Indian aviation
Go First halted operations on May 3, 2023, following which the National Company Law Tribunal (NCLT) accepted its plea for voluntary insolvency. At the time of declaring bankruptcy, the airline had approximately 7,000 employees. The Ministry of Civil Aviation has noted that the hindrance caused by the Insolvency and Bankruptcy Code (IBC), which obstructs repossession of aircraft by lessors, is costing Indian airlines an additional $1.2-1.3 billion in lease cost. The burden is potentially impacting the entire aviation industry.
