India’s Bankruptcy Regime Tested by Go First’s Insolvency
Go First, a low-cost airline in India, collapsed in May after four years of losses, safety violations, and operational confusion. In January, a flight from Bangalore to Delhi carried baggage but forgot a third of its passengers. Despite holding valuable assets in the form of 45 aircraft stranded at Indian airports, the airline faced a blanket hold on all its assets during bankruptcy hearings. This highlights longstanding problems with bankruptcy in India, which were meant to be solved by a new insolvency code introduced in 2016. The code aimed to shift power from indebted companies to their creditors, allowing some interminable bankruptcy proceedings to come to an end. A smooth journey through the court system was meant to send a bigger message—that the risk of lending to Indian businesses could be mitigated by ensuring that collateral is readily transferable. This, the argument went, would help reduce borrowing costs for corporate India more broadly.
A prompt liquidation and redeployment of assets has obvious benefits for the aviation industry, its creditors, and possibly for rivals keen to snap up its planes to add capacity in response to packed flights. However, the court hearing Go First’s case now appears to be saying that easily identifiable assets like the company’s airplanes cannot be reclaimed while more complicated financial ones are unwound.
2023-06-01 07:58:52
Link from www.economist.com
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