Air India’s funds have been frozen by the Central Bank of India after a report was released that cited mismanagement and other irregularities in the company. The decision has caused chaos for all Air India passengers, who are now left without tickets to their destinations.
Air India, a major airline company in India, has announced that it will temporarily stop all flights and pull all inventory from global distribution systems as its funds are impounded. Read more in detail here: airline news.
As its funds are impounded, Air India temporarily pulls all inventory from global distribution systems.
on January 4, 2022 by Gary Leff
Air India, which is currently owned by the government but is set to be sold to Tata Group this month, briefly pulled all of its inventory from global distribution systems at the end of the year – where more than half of the airline’s ticket sales are made – after a court ordered all of its funds held by IATA for settlement to be impounded.
While the airline has been in financial trouble for years, with Air India on the verge of being shut down due to a lack of fuel before the pandemic, the issue this time was that the government carrier’s assets abroad were treated as belonging to the government and seized to enforce a judgment against it by a court.
Devas Multimedia’s stockholders and investors launched a lawsuit in US courts in June 2021 to seize the assets of Air India, which it said was legally indistinguishable from the Union of India. The firm maintained that the Indian flag carrier is recognized as a party obligated to pay the dues of the arbitration ruling, which awarded Devas Multimedia $111 million in addition to fees and interest.
The International Air Transport Association (IATA) was directed to seize monies received on behalf of Air India and the Airport Authority of India in the dispute by the Superior Court in the district of Montreal. According to a Devas representative, the IATA action has resulted in the seizure of more than $30 million.
Ticket sales that would have been collected by the international airline settlement organization would not have gone to the airline if the monies had been seized, therefore they didn’t want that cash to accrue. To avoid the problem, they returned their inventory to agents and internet portals for booking while required purchases to be paid by credit card (where money flow directly to the airline).
The halting of financial transfers has an impact on the economics of Tata Group’s purchase of Air India, which is not a party to the proceedings. As part of the agreement, the Indian government will most likely be required to make up the shortfall.
It remains to be seen if a private corporation can turn around a state-owned airline that is rife with corruption. After failing to persuade staff to quit upgrading their friends, Air India began requiring flight attendants to share hotel rooms in order to save money. However, an airline with difficulties is one where even the director of flight safety attempts to fly after drinking and corporate art has gone missing.