Some of the listed Wadia Group entities reduced their exposure to the now-bankrupt Go First airline (founded as GoAir) in 2022-23, with Bombay Burmah Trading Corporation’s (Bombay Burmah’s) exposure falling to Rs 65 crore.
According to the annual report of 2021-22, Bombay Burmah had an exposure of Rs 315 crore to the airline by way of inter-corporate deposits (ICDs).
Bombay Burmah also holds a 32 per cent stake in the airline directly; the rest is owned by Wadia’s private entities.
Shares of Bombay Burmah, with a market valuation of Rs 6,684 crore, closed at Rs 958 per share on Tuesday.
The ICDs of other Wadia companies were repaid in the same year, with one of India’s largest food manufacturers Britannia Industries getting its entire Rs 320 crore back a year earlier, reported annual report filings.
The airline, which received equity of Rs 3,200 crore in the last two years from promoters, filed for bankruptcy on May 2, blaming the American engine maker Pratt & Whitney (P&W) for failing to maintain its faulty engines to restart its 28 grounded aircraft in India.
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P&W has called the airline’s allegations “without merit”.
Apart from Wadia companies, Indian banks, which have an exposure of Rs 6,500 crore to the airline, are planning to make provisions for the loss and make a claim with the resolution professional.
Bombay Burmah will also make a claim with the resolution professional appointed by the National Company Law Tribunal. If the airline restarts early, the losses of banks will reduce, observed corporate lawyers.
Notwithstanding problems faced by the airline, a Go First executive said it would not default on the monthly salary bill of Rs 45 crore. The airline has Rs 300 crore to restart operations.
Besides Go First, 50 aircraft of IndiGo and 20 (with turboprop engines) of SpiceJet are also reportedly grounded as of date due to P&W’s faulty engines.
Experts said lessors cannot fly their grounded aircraft as this action would take another six to 12 months to enforce, or release Go First aircraft to other airlines.
“There is already a long waiting list for P&W engines with priority being Lufthansa, Turkish Airlines, United, Swiss Air, airBaltic, All Nippon Airways, Hong Kong Express Airways, Air Tanzania, Air Senegal and several others, before Go First and IndiGo get their turn. This will be a bitter pill to swallow for lessors under the circumstances. It makes strategic sense to stay locked with Go First, till such time the airline restarts and ensures long-term storage checks are done on time and maintenance actions continue to not let asset value erode,” said Mark D Martin MRAeS, chief executive officer, Martin Consulting — an aviation consulting firm.