Singapore Airlines Defends Air India Investment Amid Challenges

Singapore Airlines (SIA) has reaffirmed its commitment to its investment in Air India, which now stands at 25.1% following Air India's merger with Vistara in November 2024. The airline group emphasized that this investment enables access to India's domestic market and international routes, which aligns with its multi-hub strategy aimed at enhancing growth opportunities beyond the limitations of a single hub model.

In a recent response to the Securities Investors Association (Singapore) (Sias), SIA acknowledged the various challenges Air India faces, including high fuel prices, currency depreciation, and operational disruptions. Air India reported a net loss of S$3.8 billion for the fiscal year, alongside net liabilities. Despite these hurdles, SIA highlighted that Air India has made tangible progress in areas such as customer experience, fleet expansion, and operational performance. The airline's net promoter score, a key indicator of customer satisfaction, has seen significant improvements, and it has received several independent industry awards.

“The Air India investment provides direct access to India’s domestic market and international flows via Indian hubs.”Singapore Airlines

SIA's Chief Executive Officer, Goh Choon Phong, serves as a non-executive director on Air India's board, allowing SIA to provide strategic guidance and oversight. This partnership with Tata Sons, which owns the majority stake in Air India, is seen as crucial for the airline's transformation efforts. SIA stated that it contributes aviation expertise to assist in Air India's turnaround strategy, reinforcing its commitment to the airline's long-term growth.

SIA's overall operating profit rose by 39% to S$2.4 billion for the same fiscal year, indicating a strong recovery in its core operations. The airline's investment in Air India, however, has resulted in a reported loss of S$945.2 million. In light of these figures, Sias inquired about SIA's capital allocation strategies and whether the board had established clear parameters for further investments in Air India.

“Air India has made tangible progress in its transformation across the customer journey and experience.”Singapore Airlines

SIA clarified that its capital allocation process is disciplined, taking into account various factors such as operating cash flow and investment requirements. The airline does not currently practice a formal quantitative forward guidance framework, citing the cyclical nature of the aviation industry and the influence of external factors like fuel prices and geopolitical developments.

As SIA prepares for its annual general meeting on July 24, it remains focused on transparency and regular disclosures regarding its financial performance and strategic initiatives. The airline's shares closed at S$7.65, reflecting a slight increase of 0.5% on the last trading day.