Go First takes two ECLGS loans totaling Rs 203.5 crore amid cash crunch

Go First's loss more than doubled to Rs 1,807.91 crore in FY22 due to US-based Pratt and Whitney's delay in supplying engines and multiple waves of Covid-19 that affected air travel

Go First airline has taken two loans worth Rs 203.5 crore during the last five months to deal with its cash crunch, Business Standard has learnt.

The two loans were granted by two government-run Banks -- the Central Bank of India (CBoI) and the Bank of Baroda (BoB) -- to the airline under the government's Emergency Credit Line Guarantee Scheme (ECLGS). The Centre had in 2020 started the ECLGS to provide government-guaranteed loans to businesses affected by the Covid pandemic.

Go First's net loss more than doubled to Rs 1,807.91 crore in FY22 due to US-based Pratt and Whitney’s (PW) delay in supplying engines and multiple waves of Covid-19 that affected air travel, the airline said in its regulatory filings last week.

The airline’s fleet comprises 54 planes and approximately 90 per cent of them are A320neo aircraft with PW engines. According to sources, around 20 A320neo aircraft of Go First are currently grounded due to delay in supply of engines.

In its filings, Go First said it was sanctioned loans of Rs 1,142 crore in FY22 from its bankers. "The company has also been servicing all the bank and statutory liabilities on time and has not defaulted or delayed any payments," it added.

In FY23, the first ECLGS loan was granted to the airline by a consortium of two banks -- the CBoI and the BoB -- in June this year. This loan of Rs 105.5 crore (CBoI's share was Rs 73.9 crore and the BoB's share was Rs 31.6 crore) was granted as the carrier took a second mortgage on its 93 acres of land at Bhayandarpada village in Thane, as per documents reviewed by Business Standard.

The second loan under ECLGS was granted to Go First by CBoI itself in July 2022. This loan of Rs 98 crore was granted as the airline took a second mortgage on its "goods and book debts and movables and other current assets", as per the documents.

Both the loans of total amount Rs 203.5 crore have to be repaid within the next six years. After a two year moratorium, the airline will need to pay the loan amount with interest in 48 equal monthly installments, the documents noted. Go First, the CBoI and the BoB did not respond to queries sent by the newspaper.

On October 5, the Union Finance Ministry modified the ECLGS, allowing the airlines to avail of up to Rs 1,500 crore loan under the scheme so that they can tide over their cash flow problems. Earlier, an airline could avail of a loan of not more than Rs 400 crore under the ECLGS. The aforementioned two loans were taken under the old ECLGS. The airline is likely to take loans under the modified ECLGS too, according to sources.

On July 28 last year, the Aviation Ministry told Parliament that SpiceJet and Go First had borrowed Rs 127.51 crore and Rs 25.65 crore, respectively, under the ECLGS.

The aviation sector was significantly impacted when international and domestic travel was curtailed during the peak of the Covid-19 pandemic. While the pandemic’s effect has been waning, the number of passengers travelling on Indian carrier's flights has not reached pre-pandemic levels as yet. Therefore, their balance sheets remain stressed.

Moreover, amid the Russia-Ukraine war, the prices of aviation turbine fuel (ATF) have shown immense volatility in the past several months. The cost of ATF forms around 40 per cent of total operating cost of airlines and impacts their financial viability.

The rupee has been weakening for the last several weeks. This is also impacting the airlines as they have to pay their aircraft lessors monthly lease rental amounts every month in US dollars.

The coming years in the Indian aviation industry are likely to see intense competition among carriers with new airline Akasa Air entering the market. Also, IndiGo is adding capacity and revamped Jet Airways will soon start operating flights.