India’s low-cost carrier, Go Airlines (India) Ltd, which recently rebranded as Go First, has been granted bankruptcy protection by an Indian tribunal. The move allows the country’s fourth-largest carrier to attempt to revive itself, but could complicate foreign lessors’ efforts to repossess their planes.

Go First has cited financial difficulties arising from engine trouble that forced the grounding of about half of its 54 Airbus A320neos, which it claims was due to “faulty” Pratt & Whitney engines. However, the US engine maker, which is part of Raytheon Technologies, has said that the claims are without evidence.

Following the National Company Law Tribunal’s decision, a moratorium has been placed on Go First’s assets and leases, with Abhilash Lal of Alvarez & Marsal appointed as the interim resolution professional, taking over management of the airline immediately. This marks the first time that an Indian airline has voluntarily sought bankruptcy protection to renegotiate contracts and debt.

While bankruptcy protection could help Go First revive its fortunes, it could create complications for the airline’s lessors, which have in recent days filed requests with India’s aviation regulator to repossess about 40 planes from Go First after the carrier missed rental payments. India has made it easier for lessors to take back planes if airlines default on payments after joining the Cape Town Convention. However, if bankruptcy protection is granted, those laws supersede lessors’ repossession requests.

Go First’s lessors include global names such as Jackson Square Aviation, SMBC Aviation Capital, and CDB Aviation’s GY Aviation Leasing. Advisors to some lessors have expressed concern that bankruptcy protection for Go First could force the lessors into lengthy litigation to repossess planes, potentially leading to higher lease rates for Indian airlines in the future. “The next step for lessors is to approach the appellate tribunal. It will be a prolonged legal battle,” said Ajay Kumar, managing partner at India’s KLA Legal, which is advising some of the leasing companies.

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