GoAir reportedly received $ 108 million loan
GoAir reportedly received an 800 crore ($ 108.6 million) loan from the banks. The loan comes as the airline continues to struggle with a low market share and negligible international flights. This funding is part of the government’s recent package to help businesses affected by the pandemic with unsecured loans.
For GoAir, the timing of this loan is quite critical. As India potentially sees a second wave of nationwide infections emerge, the aviation industry could experience a further downturn, hampering its strong recovery. If blockages were reimposed or travel restrictions added, it would quickly decimate the number of passengers, as has happened in other regions of the world.
If that were to happen, GoAir, which has already been in financial difficulty since last year’s lockdown, could be at high risk of needing a bailout. The airline has already seen its debt level rise last year and its revenues fall sharply due to weak demand. The increase in debt prompted the carrier to seek government relief and demand debt restructuring.
Interestingly, GoAir recently considered the possibility of making public, citing robust markets and the upturn in aviation. However, with cases on the rise in India for the first time in months, GoAir’s IPO plans may have to be put on hold. once again.
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India has taken a relatively light approach with airline support during the pandemic, despite the huge industry. However, he has put in place several loan and debt relief programs to keep businesses struggling with the pandemic going. One such program was the One Time Debt Restructuring Scheme proposed in August, which GoAir reportedly opted for to restructure its growing debt.
However, the airline was never forced to embark on a difficult restructuring process and instead opted for another government program: the Emergency Credit Line Guarantee Scheme 2.0 (ECLG). The ECLGS has provided the loan of around 800 crore ($ 108.6 million) which will allow GoAir to maintain its operations for the next several years, according to Commercial standard.
GoAir is a private airline of the Wadia Group, a billion dollar Indian conglomerate. With strong corporate backing, GoAir isn’t most at risk of collapsing yet. However, sustained losses can push any airline into crisis.
For GoAir, the past year was a shock. For an airline that has long been in the spotlight for almost always making a profit, 2020 ended such a race. The carrier’s profits quickly turned into losses in the first half of the year, with flights being stranded from March to May.
Even after flights resumed, GoAir saw its market share drop as it operates a smaller network. For now, this $ 108.6 million loan will be crucial in helping the airline weather this storm and return to profitability.
What do you think of the future of GoAir? Have you ever flown with them? Let us know in the comments!