GoAir IPO: Go Airlines May Face Turbulence Over Possible Floating Rate Aircraft Leases

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NEW DELHI: Go Airlines’ IPO is expected to introduce 22 new aircraft in less than two years, but expects a possible switch to variable rate aircraft leases to have a negative impact due to of rising interest rates.

The low-cost airline has filed draft documents for a first sale of shares worth Rs 3,600 crore and will be the first national scheduled carrier to be listed on the national stock exchanges in nearly six years.

In addition to the prospects of switching to variable rate leases for new aircraft, the problems linked to the “GoAir” brand and certain associated brands, as well as indebtedness, are among the risk factors mentioned in its draft prospectus Red Herring (DRHP).

All of its 55 aircraft as of March 31, 2021 were on operating and fixed-rate leases, but the airline expects future leases may be based on variable rates.

The airline, which announced the name change from “GoAir” to “Go First,” plans to add eight new aircraft in fiscal year 2022 and 14 in the next fiscal year ending March 31, 2023. These aircraft will be part of the order placed for 98 A320 neo. Currently, the carrier’s fleet comprises a mix of A320 neo and A320 ceos.

While noting that its indebtedness could harm its business, Go Airlines said it may have to switch to variable rate leases for aircraft in the future.

“All of our 55 aircraft as of March 31, 2021 are under fixed rate operating leases and we may be required to secure variable rate leases for future aircraft leases. Consequently, a significant increase in interest rates could increase our obligations under any variable rate lease and could have a negative impact on our operating results ”, in accordance with the DRHP.

As of April 19, 2021, the company’s aggregate debt on a consolidated basis was Rs 8,160.09 crore.

According to the DRHP, the “GoAir” brand and certain related brands are registered in the name of Go Holdings, of which one of the promoters Jehangir Nusli Wadia holds 99% of the shares.

During the rebranding transition period and thereafter, it may use trademarks / service marks, which mainly consist of the terms “Go”, “GoAir” and “Fly Smart”.

In accordance with the DRHP, in March 2021, Go Holdings filed two applications with the Trademark Registrar, for the registration of two word marks used exclusively by our company, namely “Go Airlines” and “www.goair.in”.

In April 2021, Jehangir Nusli Wadia filed an application with the National Internet Exchange of India, to transfer 115 domain names registered in the name of the company, from one domain registrar to another domain registrar, namely Net4India Ltd to Network Solutions.

“Our company opposes the aforementioned claims and has also applied for registration of these two word marks in our own name. The company also intends to take the necessary steps and pursue legal options to establish its ownership over all trademarks and domain names.

“There can be no assurance that these matters will be resolved in our favor or that there will be no claims regarding our intellectual property from Go Holdings in the future. Such events could have a material adverse effect on our activities, our financial position and the results of operations ”, indicates the document.

In the DRHP, the company also mentioned that some of its A320 neos have been grounded due to issues with Pratt & Whitney (P&W) engines in the past and complaints have been made.

“In terms of contractual agreement with Pratt & Whitney, there is a limitation of their liability. We have filed claims with Pratt & Whitney regarding the losses we incurred during this period, amounting to $ 67 million. , which corresponds to a rate of damages currently under discussion with Pratt & Whitney.

“As of December 31, 2020, Pratt & Whitney has paid an advance of $ 10 million pending final settlement between us and Pratt & Whitney,” he noted.

Regarding Go Airlines’ IPO plan, Geojit Financial Services research director Vinod Nair said the aviation industry demand scenario is expected to improve as COVID cases are expected to drop significantly by June-July due to lockdown, herd immunity and the vaccination campaign. This will support long-term fundraising plans, he added.

The airline has filed preliminary documents for the IPO amid the aviation industry facing strong headwinds due to the second wave of COVID.

InterGlobe Aviation, parent company of the country’s largest airline, IndiGo, was the last domestic scheduled carrier to go public. It was listed in November 2015. SpiceJet and Jet Airways, which suspended operations due to financial difficulties in April 2019, are also listed.


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