The decision comes almost a year after ministers announced a preferred bidder for the South Ayrshire complex had been chosen in February, five months after its sale to the original chosen bidder – believed to be Glasgow Airport owner AGS – fell through.
Reports earlier in the year suggested one barrier to the sale may have been the £43.4m loan from the Scottish Government which kept the airport going after its purchase for £1 in 2013.
In answer to a written question in Holyrood, finance minister Kate Forbes confirmed the decision not to go ahead with the sale.
She said Prestwick has been “adapting” to the challenges faced by Covid-19, and said the government still intends to sell the airport in the future.
Ms Forbes said: “Scottish Ministers still intend for Prestwick Airport to return to the private sector at the appropriate time and opportunity.
"Having carefully considered bids received under a recent sales process, I can advise that Ministers have decided to not proceed with a sale at this time.
"With a refreshed board and management in place, the Scottish Government is confident the business will continue to develop in its strategy for growth.
Prestwick’s chief executive, Ian Forgie, said the airport had made an operating profit of £0.5m in the last year, compared to losses of £7.8m in 2016/17.
He added the total profit after tax for the year is £12.8m for the airport, which included a non-cash revaluation of assets.
However, the announcement caused anger in other parts of the industry, including Edinburgh Airport.
A spokesperson for the capital’s airport said it was “extremely distasteful” to see Prestwick “crowing about profit” while the aviation sector continues to rebuild following thousands of job losses and without “any direct support”.
An Edinburgh Airport spokesman said: "Almost £50 million has been sunk into an airport that yet again the government cannot sell, yet an industry that it itself has admitted is one of, if not the hardest hit continues to go without any direct support.
“This has been a drain on public finances for years and there is no evidence that it will end soon.
"The government must realise that it is far more important to provide funding for infrastructure with a chance of success and recovery and maybe now is the time for them to finally set out its plans for the rest of Scotland’s aviation and travel industry.”
Scottish Labour’s transport spokesperson, Colin Smyth, said answers as to why the deal collapsed must be provided.
He said: “Thousands of jobs are on the line – there is simply no room for the SNP’s usual incompetence. We cannot abandon Prestwick and let it become yet another failed industrial intervention from the SNP.
“The SNP must show they have a plan to for the future of this vital strategic asset, and the tens of millions of taxpayer pounds invested in it.”
The Liberal Democrat economy spokesperson, Willie Rennie, added: “From Bifab to Lochaber, the Lanarkshire steel plants to Fergusons, it is clear now that the SNP Government are incapable of effectively using public money to create economic opportunities.”