'Scarred' and 'egregious': Global lessors frustrated by Go First case

“Scarred”, “burnt”, “egregious”, and the “yellow light of caution” — these are a few of the terms that global aircraft and engine lessors used on Tuesday to express their deep frustration over their inability to repossess their planes and engines from Go First due to ongoing court cases.

Go First ceased flight operations on May 3 following the submission of an insolvency application to the National Company Law Tribunal. On May 10, the tribunal imposed a moratorium on the airline’s assets, effectively preventing lessors from reclaiming their approximately 45 aircraft (and engines on them) from the carrier. This decision has left lessors profoundly discontented.

While speaking at Airline Economics Growth Frontiers India 2024, Michael Lombardi, senior vice-president (V-P), Griffin Global Asset Management, said Go First’s case has given him pause. “It is probably a yellow light of caution,” he added.

Lombardi noted that the process of reclaiming planes has shown gradual improvement since the bankruptcy of Kingfisher Airlines, through Jet Airways’ insolvency, and onward.

During the last spring season, Griffin was involved in a “relatively advanced discussion” with an Indian carrier to lease B737 planes. However, this discussion was put on hold “for several months” because Go First went bankrupt (in May 2023), and Griffin’s investors had a lot of questions that he could not answer at that point in time, he mentioned.

“As we have come through this, we continue to track it very closely,” Lombardi noted, adding that this case tells us that one must choose their partners wisely.

Kishore Korde, executive V-P, Air Lease Corporation, stated that while the lessors will certainly object to the fact that they can’t get their planes out, what is perhaps “even more egregious” is that they can’t even go and maintain their planes.

“When I land in Mumbai on an A380 plane, I see these grounded Go First planes at the airport, which literally have a brown layer on them. When you look at that, it just highlights how much needs to be done to get to a solution for these types of situations,” he added.

He mentioned that since Airbus and Boeing’s production lines are sold out until 2030, a significant number of these planes will be obtained by airlines through lessors using the sale-and-leaseback option.

“So somebody could make the argument that there are a whole bunch of other planes (outside India) looking for sale-and-leaseback, so why do I need to risk getting into a situation like Go Air (Go First),” he said.

Under the sale-and-leaseback process, the airline sells its planes to a lessor and immediately leases them back. The airline then pays a monthly rent to the lessor. This process helps the airline maintain liquidity. Korde, meanwhile, clarified that none of his planes has been leased to Go First.

John Duffy, chief commercial officer, SKY Aero Management, said his one plane with Go First is currently grounded in India, and he agrees with what Lombardi and Korde mentioned before.

“In any organisation, in any sector, there is always a pendulum that swings between growth and conservatism. The pendulum in leasing companies has swung towards the chief risk officer (with regards to India),” Duffy said, even as he expressed hope that the Go First case would be sorted out soon.

Vassil Vassilev, V-P (sales and marketing) for India, Türkiye, and Commonwealth of Independent States countries at Engine Lease Finance Corporation, said that the “biggest issue” today for lessors is what is going to happen with the Go First case because it would have “serious consequences if not resolved as soon as possible”.

“Those consequences will complicate the way lessors see India as a jurisdiction, and unfortunately, it will have an effect on our ability to support Indian customers down the road. There is a lot to be done. There is a lot (planes and engines) to be financed. If we are limited (in this case), then the challenges for Indian airlines could be even bigger,” he added.

Christopher Rodrigues, senior V-P (sales and marketing) for Asia, SMBC Aero Engine Lease, said that for lessors, the Go First case has become a “waiting game”.

“It is what we convince our shareholders about — how burnt we are going to get and what scars we are going to come up with,” he added.