Air India, which is owned by the government but due to be privatized this month in a sale to Tata Group, pulled all of its inventory from global distribution systems briefly at the end of the year – where more than half of the airline’s ticket sales occur – as a court ordered all of its funds held by IATA for settlement impounded.
While the carrier has been financially troubled for years, with Air India on the verge of being shut down before the pandemic and unable to buy fuel, this time the issue was that the government carrier’s assets abroad were treated as belonging to the government and a court ordered them seized to enforce a judgment against it.
In June 2021, the shareholders and investors of Devas Multimedia had filed a case in US Courts to attach the assets of Air India, which it had then argued, is legally indistinct from the Union of India. The company argued that the flag carrier of India is treated as a party liable to pay the dues of the arbitration award, awarded in the favour of Devas Multimedia to the tune of $111 million plus costs and interest.
…The Superior Court in the district of Montreal ordered the seizure of cash collected by the International Air Transport Association (IATA) on behalf of Air India and the Airport Authority of India in the matter. As per a Devas spokesperson, more than $30 million have been seized as a consequence of their IATA action.
With funds ordered impounded, ticket sales that would have been collected by the international airline settlement group wouldn’t have gone to the airline – so they didn’t want to allow that cash to accumulate. They returned their inventory for booking through agencies and online portals while requiring sales to be paid by credit card (where funds go directly to the airline) to circumvent the issue.
The stalling of funds transfers affects the economics of the Air India acquisition by Tata Group, which is not otherwise a party to the proceedings. Presumably the government of India will be forced to make up the difference as a piece of closing the transaction.
It remains to be seen whether the private company can turn around a corrupt state-owned airline. Air India had been unable to get employees to stop upgrading their friends and to save money starting making flight attendants share hotel rooms. But an airline where even the director of flight safety tries to fly after drinking and the company art has gone missing has problems.