Go First Bankruptcy: IndiGo, Spicejet stocks fly; bank stocks dive

Go First Airlines Bankruptcy: Share prices of Go First’s competitors surge in trade as the cash-strapped airline files for voluntary insolvency. However, its lenders shares and the share prices of the airline’s owner, the Wadia Group’s other companies fall in trade.

Go First, Bankruptcy
Section 29A sets out exclusion criteria for persons to become a resolution applicant, and it virtually puts promoters at greater risk of losing control.

Indigo, Spicejet Share Price: As airline Go First filed for voluntary insolvency on Tuesday, the share price of competitors, Indigo, or InterGlobe Aviation, soared 8.2% in trade while Spicejet stock prices flew 5.5%. Since Go First owes its financial creditors almost $800 million or Rs 65.21 billion rupees, shares of the cash-strapped airline’s lenders tanked in trade. The shares of Central Bank of India sank 7.2% and Bank of Baroda slipped up to 4.1%, while private lenders, IDBI Bank and Axis Bank, saw their stock prices tank 3% and 1.1% respectively. The company’s parent, Wadia Group, also owns Britannia Industries and Bombay Dyeing & Manufacturing’; both the firms’ share prices crashed on the bourses, falling up to 5%.

Go First Insolvency 

The airline has not defaulted on its dues yet, “however, considering the present financial situation of the corporate applicant, defaults to financial creditors would be imminent,” said the company in a filing to the National Company Law Tribunal, adding, “Currently, the assets of the company are not sufficient to meet its liabilities.” Go First stated that the engines provided by Pratt & Whitney were faulty, the “ever-increasing number of failing engines supplied by Pratt & Whitney’s International Aero Engines” resulted in half the airline’s fleet being grounded. The airline has also suspended operations from 3 May to 5 May.

The airline has already defaulted on scheduled payments to its operational creditors, with up to Rs 12.02 billion rupees owed to its vendors and Rs 26.60 billion rupees owed to aircraft lessors. Go First has already begun to receive notices from aircraft lessors for termination of aircraft lease agreements and some have started actions against the company to ground or repossess aircraft, the filing said, adding that six lessors have also invoked letters of credit issued to them by lenders.

Go Air’s voluntary insolvency is the first major airline collapse since Jet Airway’s bankruptcy filing in 2019, amid a sector characterised by its fierce competition. Currently, Tata Group’s acquisition of Air India and its subsequent merger with Vistara dominated the headlines, while Indigo remains as traveler’s primary choice of airline.

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First published on: 03-05-2023 at 11:12 IST