Global Aviation Body Lowers India’s Rating Due to Go First Controversy

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The Aviation Working Group (AWG), a global aviation leasing body, has placed India on a watchlist with a negative outlook. This decision was made after the National Company Law Tribunal granted Go First’s insolvency petition and imposed a moratorium, preventing lessors from repossessing their aircraft. AWG claims that India has not complied with international aircraft repossession norms.

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After the National Company Law Tribunal (NCLT) accepted Go First’s plea, SMBC Aviation Capital, one of the largest aircraft leasing companies globally, filed an appeal with the National Company Law Appellate Tribunal (NCLAT) on May 10. The hearing for the case is ongoing and will resume on Monday. Additionally, two other aircraft lessors, GY Aviation and SFV Aircraft Holding, also appealed to the appellate tribunal on Thursday.

AWG’s unfavorable assessment falls within the scope of the Cape Town Convention, a global agreement concerning the repossession of planes. The treaty streamlines the process for lessors to reclaim aircraft in cases of airline payment defaults. However, the NLCT’s decision has nullified this provision, rendering it ineffective. As a result, India’s score has been downgraded from 3.5 to 3. India became a signatory to the Cape Town Convention in 2008.

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Domestic carriers may face a potential increase in aircraft leasing fees. This is because Go First, which owes Rs 2,660 crore to its aircraft lessors and Rs 1,202 crore to its vendors, has defaulted on payments. In total, Go First’s liabilities amount to Rs 11,463 crore, with Rs 6,521 crore being owed to banks. To mitigate the situation, Go First has already taken Rs 1,300 crore under the government’s emergency credit line guarantee scheme (ECLGS).

The fleet comprises 54 aircraft in total, out of which 28 are currently not in operation due to engine problems with Pratt & Whitney. The remaining 26 planes are currently operational. Some of the lessors have requested the Directorate General of Civil Aviation to deregister 45 of the planes.

Shruti Rag