Indian airline Go First's effort to start insolvency proceedings has become ensnared in a tussle with aircraft lessors after they asked the aviation regulator to deregister some of its planes as a step towards taking them back.
India's first major airline collapse since 2019 underlines the fierce competition in a sector dominated by IndiGo and the recent merger of Air India and Vistara under the Tata conglomerate.
Some lessors opposed Go Airlines (India) Ltd's plea at the first hearing of the National Company Law Tribunal (NCLT) on Thursday, after the airline had blamed "faulty" Pratt & Whitney engines this week for the grounding of about half of its fleet.
The cash-strapped airline wants the tribunal to accept its plea and is seeking an interim moratorium to save its assets, a move the lessors oppose.
GY Aviation Lease, SMBC Aviation Capital, Pembroke Aircraft Leasing and some others have submitted requests to take back at least 20 planes on Thursday, the regulator's website shows.
Go First did not immediately respond to a request for comment on the lessors' bid to deregister the planes.
Go First had to ground more than half its 54 Airbus 320 neos fitted with Raytheon owned P&W engines by April, according to a filing seen by Reuters.
Engine failures have cost the airline 108 billion rupees ($1.3 billion) in lost revenue and expenses, it said.
Amid the dispute between the lessors and the troubled airline, banks with exposure to it are awaiting the tribunal's decision to decide their next course of action, two people involved in the talks told Reuters.
"Since individual bank exposures are not high and some portion of it is guaranteed by the government, banks are preferring to wait it out till the NCLT order is out," said one of the bankers.
The bankers sought anonymity as the talks were private.
Central Bank of India Ltd, Bank of Baroda, IDBI Bank Ltd and Deutsche Bank are among Go First's financial creditors, a court filing shows.
Although the government has not yet nudged the involved banks to take any specific action, one of the sources said the banks were open to the idea of restructuring.
Central Bank of India has said its exposure to the airline, at 0.91% of its total advances, was 13.05 billion rupees by the end of March, with an additional 6.82 billion sanctioned under a government-backed emergency credit guarantee scheme.
The company owes financial creditors 65.21 billion rupees ($798 million), its bankruptcy filing showed, and had not defaulted on any of those dues by the end of April.