Go FirstImage Credit source: File Photo
The country’s largest fuel retailer Indian Oil Corporation Limited (IOCL) has sought bank guarantees of Rs 500 crore from cash-strapped airlines GoFirst after it filed an insolvency petition before the National Company Law Tribunal (NCLT) on May 2. According to a report, the only company that supplies fuel to GoFirst, controlled by the Wadia Group, owes around Rs 50 crore. Which can be recovered soon. IOCL is the sole supplier of jet fuel to low-cost carrier GoFirst, the country’s largest fuel retailer.
The airline says that it has filed an application for Voluntary Insolvency Resolution Proceedings before NCLT, Delhi due to paucity of funds. In its first official statement after the move, the company blamed Pratt & Whitney (PW) engines for grounding almost half of its fleet. The sale of jet fuel by Indian retailers to airlines is backed by bank guarantees provided by the buyers.
IOCL will now take a decision on future supplies after resuming Go First operations. In such cases, the company opts for the ‘cash-and-carry’ model, wherein the airline company buys aviation fuel with advance payment so that the dues can be paid every day to reduce the risk of OMCs.
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Go First and IOCL have a relationship of 15 years
According to sources, IOCL has taken the bank guarantee payment issued by Bank of Baroda, which will take care of the major portion of GoFirst’s dues. IOCL says that we have a 15-year relationship with GoFirst. We hope the airline recovers and resumes operations and we get our money as it seems the main problem is a bad engine.
6,521 crore outstanding on Go First
GoFirst said that as of April 28, it has an outstanding loan of Rs 6,521 crore from Bank of Baroda, Central Bank of India, ICICI Bank and others. As per the filing in NCLT, all the creditors owed Rs 11,463 crore. It also includes dues of banks, financial institutions, vendors and aircraft lessors.
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Airlines made this allegation in court filing
Go Airlines alleged in its Delaware court filing that Pratt & Whitney’s new Airbus SE jets were grounded for 17,244 days over the past three years due to engine faults. Pratt has failed to comply with the arbitration order Singapore mandated it to supply spare engines and spares to the airline, creating “a significant risk that GoFirst will go out of business and be forced to declare bankruptcy”. Will be forced to.