Aviation Working Group downgrades India ratings amid Go First, lessors fight over possession of aircraft

UK-based global aviation watchdog Aviation Working Group (AWG) has downgraded India to "negative" from "positive" after lessors were unable to repossess their aircraft from embattled Go First after it filed for insolvency in May 2023. With AWG's downgrade, it is probable that lessors will increase the aircraft leasing rates for Indian carriers, Business Standard reported.

"This....downgrade is necessary as gaps in CTC (Cape Town Convention) primacy, notably in respect of bankruptcy legislation, have resulted in material non-compliance by India, with substantial losses to relying creditors (lessors)," the AWG said in a notification on December 6.

India is a signatory of CTC, which is an international treaty providing time-bound remedies for lessors to repossess planes, mitigating their risks. Lessors have been urging India to pass a parliamentary bill to implement this treaty, which will prioritise CTC over insolvency laws. 

With the MCA notification, the Indian government has officially adopted the treaty.

After Go First filed for its insolvency proceedings, AWG placed India on its watch list after the National Company Law Tribunal (NCLT) barred lessors from repossessing planes from the cash-strapped airline. 

Go First Airline stopped operating flights from May 3. Since then its lessors had been asking the Directorate General of Civil Aviation (DGCA) to give back more than 40 of the airline's 54 planes. But the NCLT on May 10 put a moratorium on all Go First's assets, barring the lessors from taking their planes back. 

Multiple lessors of Go First have filed an appeal in the higher tribunal and courts to repossess the planes.

Earlier in September 2023, the aviation watchdog downgraded India's compliance rating with international leasing laws over the legal tussle of Go First with its lessors. 

But after the Ministry of Corporate Affairs (MCA) issued a notification on October 3, exempting all plane- and engine-related transactions from the Insolvency and Bankruptcy Code, AWG upgraded India to the "positive" category.

On the other hand, the Delhi High Court on Wednesday instructed the Resolution Professional (RP) overseeing the crisis-hit Go First to submit an affidavit in response to a lessor’s plea for contempt action. The lessor has accused the RP of non-compliance with the court order, hindering the inspection and maintenance of the aircraft.

The court has set a deadline for the RP to file the affidavit by December 10, making it explicit that the court’s orders must be followed meticulously.

The Go First case is scheduled for the next hearing on December 12, where the court will assess the compliance status.

The high court had earlier allowed lessors to engage security personnel for protecting their idle aircraft. Additionally, it had directed the RP to share maintenance-related documents with lessors.