You are currently viewing The Why Go First dilemma may drive up the price of plane tickets in India.

The Why Go First dilemma may drive up the price of plane tickets in India.

far if aircraft lessors are in danger as a result of Go First’s bankruptcy and consequent suspension, the situation may end up being far worse for other local carriers operating in India and their passengers.

Business News from India Today: The National Company Law Tribunal’s (NCLT) acceptance of troubled low-cost airline Go First’s voluntary insolvency appeal has angered global aircraft lessors, which might drive up airlines’ operating costs and, in turn, ticket prices.

After the NCLT accepted Go First’s voluntary insolvency plea, the world’s second-largest aircraft lessor, SMBC Aviation Capital, wrote to the tribunal expressing concern that “lessors and international aircraft owners see India as a risky jurisdiction for aircraft leasing.”

According to legal documents obtained by Reuters, Go First also expressed concern that India’s move to prevent leasing firms from seizing Go First planes would “jolt” the market and cause a trust crisis.

This announcement occurred at a time when two Indian airlines had received at least fifty requests to return leased planes from various lessors.

Lessors have filed applications to enforce their rights under international rules, and they’ve warned that this new regulation could increase the cost of leasing planes to Indian domestic airlines.

far if aircraft lessors are in danger as a result of Go First’s bankruptcy and consequent suspension, the situation may end up being far more precarious for other domestic carriers operating in India and for passengers.

The Go First Crisis and Its Effects on Indian Aviation
India is the world’s third-largest aviation market, but since the Covid-19 outbreak, demand for air travel has skyrocketed, and airlines serving the country are struggling to keep up with demand.

At present, Indian airlines run a fleet of about 700 aircraft, with the vast majority of these planes being owned on a sale-and-leaseback basis. Lessors are in a state of worry because of the Go First incident because they feel they have been abandoned.

Since India has been labelled a “risky jurisdiction” by aircraft lessors, further increases in leasing rates could have a significant impact on the operational costs of Indian carriers, which would ultimately be passed on to customers.

The Go First incident occurred at the worst possible time, as major Indian airlines like Air India and IndiGo were planning to rapidly increase their fleet size to meet surging demand.

If India’s aviation industry continues to expand at its current rate, it is projected that Indian carriers will need more than 2,200 aircraft within the next 20 years.

Primus Partners Co-Founder and CEO Nilaya Varma told PTI that other Indian airlines may have to pay higher risk premiums if the country is seen as a high-risk jurisdiction.

According to Varma, “this means higher lease rentals for domestic carriers and increase in the cost of doing business imply higher costs being passed onto passengers in the form of high ticket prices,” making it harder for Indian airlines to compete with their overseas counterparts.

Indian aviation could be challenged internationally, according to the CEO of a minor airline, Simran Singh Tiwana, who stated that the NCLT’s verdict in favour of Go First “may not be very pleasing” for the lessors.

Afraid Lessors
Lessors are concerned that other financially troubled airlines may seek refuge at the NCLT under a moratorium. The inability to reclaim leased aircraft will be devastating to the bottom lines of lessors.

According to a senior executive in the aviation business who spoke with the news agency PTI, more lessors may request deregistration of planes leased to other airlines in the future.

This month, lessors have requested that the DGCA deregister 45 Go First planes and 5 SpiceJet jets in accordance with the Cape Town Convention (CTC).

It should be kept in mind that the CTC requires the deregistration of an aircraft within five business days after a lessor has requested it under the Irrevocable De-Registration and Export Request Authorization (IDERA) clause. However, the National Company Law Tribunal’s (NCLT) acceptance of Go First’s voluntary insolvency plea has shielded the company from liability, and the lessors cannot reclaim the leased aircraft at this time.

According to the aircraft Working Group (AWG), a non-profit nonprofit legal body including key aircraft manufacturers, leasing businesses, and financial institutions, Go First’s insolvency proceedings are a material development that involved CTC compliance in India.

It is now monitoring the country closely while maintaining a pessimistic outlook.

Due to “the DGCA’s failure to process IDERA deregistration applications for aircraft whose leases were terminated prior to the imposition of the moratorium within the timetable set forth in its SOP results in a negative outlook for India’s scoring,” the AWG recently stated.


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