Grounded Airline's Engines Returned to Lessor: A Pivotal Moment in India's Insolvency Saga

The National Company Law Tribunal (NCLT) in India has ordered Go First, a grounded airline, to return four engines to Engine Lease Finance B.V., a specialist bankruptcy court. This decision marks a significant development in the carrier's ongoing insolvency proceedings, as the resolution professional overseeing the process has indicated an intention to comply with the order and has already begun returning the first engine.

Reclaiming Assets: A Crucial Step in Resolving Insolvency

Ending a Longstanding Dispute

The NCLT's ruling puts an end to a dispute between the Irish lessor, Engine Lease Finance, and the carrier, Go First. The dispute dates back to when Go First ceased operations, leaving the lessor in a precarious position. However, a crucial April 2024 ruling by the Delhi High Court, which ordered the deregistration and return of leased aircraft, paved the way for Engine Lease Finance to re-apply for the return of its engines.

A Domino Effect: Lessors Lining Up for Asset Recovery

Engine Lease Finance was one of 16 entities that approached the NCLT to obtain orders for the return of their assets placed at Go First. The remaining engine lessors are set to return to the NCLT on August 9, 2024, to argue for the return of their engines. This collective effort by the lessors highlights the importance of asset recovery in the insolvency process, as they seek to reclaim their rightful property and mitigate the financial impact of the airline's collapse.

Dwindling Hopes for Relaunch

Go First is nearing the end of a 60-day extension period to complete its corporate insolvency resolution process (CIRP). The deadline to finalize the insolvency process is August 3, and the NCLT has made it clear that this will be the last extension granted. India's insolvency regulations mandate that the CIRP process be completed within 330 days, after which liquidation procedures will commence.Earlier this year, the resolution professional and committee of creditors had harbored hopes of selling Go First and potentially relaunching the airline. However, the April high court deregistration decision has severely damaged any prospects of a relaunch, and potential buyers who were participating in a formal expression of interest process have gone quiet.

Navigating the Complexities of Insolvency

The return of the engines to Engine Lease Finance and the ongoing efforts by other lessors to reclaim their assets highlight the intricate nature of insolvency proceedings in the aviation industry. The delicate balance between the interests of creditors, lessors, and the airline itself must be carefully navigated to ensure a fair and efficient resolution process.As the NCLT's decision sets a precedent, it will be closely watched by industry stakeholders, as they seek to understand the implications for future insolvency cases involving aircraft leasing arrangements. The outcome of this case could have far-reaching consequences for the aviation sector, both in India and globally, as the industry grapples with the challenges posed by the COVID-19 pandemic and its aftermath.