Lenders of grounded Indian airline Go First plan to legally challenge the aviation watchdog's interpretation to retrospectively apply changes to bankruptcy law that could allow lessors to reclaim planes, according to four people with direct knowledge.
India last month tweaked its laws to exclude leased aircraft from assets that are frozen during bankruptcy proceedings.
With lessors of Go First up in arms about not managing to get their planes back, the Directorate General of Civil Aviation, in a court filing, said the law changes will apply restrospectively, indicating relief for the lessors.
But lenders of Go, to whom the airline owes $783 million, fear the value of the grounded airline will deteriorate further if planes are released, diminishing interest from potential bidders and putting recovery of their funds at risk, the sources said.
They plan to tell a Delhi High Court judge the bankruptcy law changes should apply prospectively, not retrospectively, since Go was already under bankruptcy protection when the law was amended, the sources said.
"Without the planes, the value of the airline will deteriorate. The amended law seems to have deterred bidders already," said one banker at a state-run bank with exposure to the airline.
The Delhi court is set to hear the ongoing dispute between lessors and Go First next on Friday.
The lenders' plea, if allowed by court, would be a setback for lessors and mean more than 50 Airbus planes of Go First would continue to be grounded in India.
Dubai Aerospace Enterprise Capital and ACG Aircraft Leasing told the court previously that some of their plane parts had allegedly gone missing and that some jets were corroding.
The Go First bankruptcy filing lists Central Bank of India, Bank of Baroda, IDBI Bank and Deutsche Bank among its lenders
Last month, Reuters reported that Go First received an expression of interest from Jindal Power. The last day to submit bids for the airline is Nov. 21, the four sources said.
