Commentary: How SIA can avoid throwing good money after bad, amid Air India losses

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SINGAPORE: Singapore Airlines had no illusion about the challenges of its long-term investment in Air India, said SIA CEO Goh Choon Phong during the results briefing in November 2025. 

But now, the challenges appear to be greater than anticipated. Air India posted losses of more than US$2.4 billion in the last financial year and was reportedly seeking financial support from its two shareholders, Indian conglomerate Tata Group and SIA.

Tata Group is Air India’s biggest shareholder with 74.9 per cent, while SIA holds the remaining 25.1 per cent stake, after the Indian flag carrier merged with the SIA co-owned Vistara in 2024.

As part of the deal, the Singapore carrier initially pumped in some S$360 million in cash into Air India, in addition to offering up its Vistara equity. It also committed up to another S$880 million, likely needed for fleet and capacity upgrades in the following years. 

But that figure looks to balloon as the Indian carrier faces existential issues.

AIR INDIA’S PROBLEMS KEEP PILING UP

It has been anything but smooth flying for Air India, since its privatisation in 2022.

It was common knowledge in aviation circles that AI was facing numerous problems related to quality of service, efficiency and timeliness over the past few years. 

Since last June, it has come under wider public scrutiny after London-bound Air India Flight 171 crashed just moments after takeoff from Ahmedabad. Just this February, Air India was fined for flying a plane without an airworthiness certificate. 

Fleet renewal has been slow, largely due to supply chain issues with American and European planemakers. Neighbouring Pakistan’s closure of its airspace to India carriers since April 2025 has also forced a major disruption in flight routes and costs. 

The war in the Middle East has dealt the latest blow, with jet fuel prices 105 per cent higher (as of mid-April) than last year’s average, according to the International Air Transport Association. 

And its CEO, Campbell Wilson – a New Zealander who cut his teeth at management roles in SIA and was Scoot’s founding CEO – is quitting this year.

CONCERNS ABOUT SIA DIVIDENDS

So what now for SIA? If it chooses to bail out Air India, shareholders might need some convincing. Detractors are concerned SIA will throw good money after bad.

Indeed, every dollar diverted to Air India will mean less money available in dividend payouts for SIS shareholders. It also means less funds for future fleet and digital upgrades, or for any other opportunistic ventures that might emerge.

DBS Group Research, in an April paper, sounded some alarm on SIA’s dividend capacity if it injects more-than-expected funds into Air India. 

Air India’s network is more heavily exposed to the Middle East, it said. The airline also had weaker pricing power, which meant it could not raise prices without losing market share in the highly competitive Indian market. This limited Air India’s ability to offset elevated fuel costs, “increasing risk of sustained losses”.

A MARKET LIKE INDIA CANNOT BE IGNORED

While there is no denying that things are looking very challenging for Air India at the moment, India is a market where aviation has only one way to go – upwards. 

With over 1.4 billion people, it enjoys the world’s fastest-growing large economy and a rapid rise in wealth, especially among its massive middle class. Travel demand, domestically and internationally, is huge and growing. 

And if SIA wants to grow beyond being a single Singapore-centric hub player, it has to be in a market like India. There, the national carrier is still the best bet: It holds international traffic rights, valuable airport slots, has a huge domestic network and enjoys good brand recognition.

It is true that SIA has not had a great record with mergers and acquisitions, from the collapse of Ansett Australia in 2001 to the write-off of its stake in Virgin Australia in 2020.

But then, SIA did not become one of the world’s most successful airlines without going into ventures having considered all the possibilities. And it did so with one of India’s most reputable business houses, the Tata Group.

STAKEHOLDERS NEED REASSURANCES

This argument alone will not convince stakeholders, especially those who already think SIA should cut its losses. 

If it coughs up the cash, SIA should attach more conditions to the injection, such as more control and oversight over Air India’s strategy and operations. To enhance reliability and quality of service delivery, SIA could also demand that AI buy into its maintenance, repair and overhaul capabilities, and service standard offerings. 

Reports from India suggest that moves are already underway in this direction, and that SIA officials are taking a more hands-on approach to operations.

SIA shareholders would also want more reassurance about any intervention – whether there is any matrix or timeline to measure recovery, or an exit strategy. They will want to know whether, and for how long, Air India will be an overhang on SIA’s share price. 

Another safeguard could be for funding to be limited and proportionate to performance recovery.

Also, SIA will need to be upfront about what this potentially huge capital injection means for its own financial resilience, especially given the Iran war’s impact on fuel and demand.

SIA HAS FACED WORSE

That said, SIA has weathered even bigger crises. Perhaps we should look at its Air India woes as just the latest in a long journey of a very successful airline. 

When the COVID-19 pandemic brought the global airline industry to its knees and caused massive job losses, SIA turned to the market to raise capital creatively. 

For the first time, it issued US dollar bonds. By mid-2020, it had raised S$22.4 billion in fresh liquidity, including S$15 billion from shareholders through a combination of Mandatory Convertible Bonds and Rights shares, and the balance from secured financing and sale-and-leaseback arrangements.

That episode taught Singapore Airlines valuable lessons on how to be resilient in the face of challenges, innovate and stay agile. But given its less-than-stellar track record in mergers and acquisitions, it is critical for SIA to assure its shareholders that it will not be throwing good money after bad in the Air India venture.

Ven Sreenivasan is a former editor and journalist who has covered financial markets, economic and corporate news and aviation for more than 30 years.