Whalesbook
SIA Profit Hit by Air India Losses
Air India’s substantial losses, reaching ₹25,606 crore in the fiscal year ending March 31, 2026, significantly impacted Singapore Airlines' (SIA) financial performance, cutting its net profit by 57%. These deep losses emerged in Air India's first full year after its merger with Vistara. SIA's CEO pointed to a 'combination of external shocks,' but the scale of these losses suggests a complex challenge for the Tata-backed airline, intersecting external pressures with its newly expanded operational scale and highlighting its vulnerability.
SIA Maintains Investor Confidence
Singapore Airlines reported a net profit of S$1.18 billion for the year, down from S$2.78 billion previously, after booking S$945.2 million in Air India's losses. Despite this significant financial hit, SIA's market capitalization stands around SGD 20.27 billion, with a trailing P/E ratio of about 8.45. Analyst ratings for SIA are mostly 'Hold', with price targets between S$6.50 and S$7.07. This indicates steady investor confidence in SIA's overall strategy, contrasting sharply with the financial difficulties faced by its Indian venture.
Indian Market Rivals Outperform
The competitive Indian aviation market presents a challenging backdrop. IndiGo, holding over 52% market share in May 2026, posted a ₹549.8 crore net profit in Q3 FY26, down 77% year-on-year but remaining profitable. IndiGo's large fleet and international routes help cushion against rupee depreciation. SpiceJet reported a 77% revenue increase in Q3 FY26 and showed operational gains, but faces auditor questions about its financial stability due to prior losses and negative working capital. Air India, significantly larger after its Vistara merger with over 5,600 flights weekly and 208 aircraft, faces greater exposure to industry disruptions than its leaner rivals.
External Pressures Mount for Air India
Air India's operations face significant constraints. The ongoing closure of Pakistani airspace, affecting Indian carriers since April 2025 and still in place by May 2026, forces longer, fuel-costlier detours, particularly on North American routes. This geopolitical issue alone is estimated to have cost Indian airlines billions of rupees. Adding to these pressures are rising global fuel prices due to Middle East conflicts and a weakening Indian Rupee, which reached 95.8900 against the USD by mid-May 2026, increasing costs for leases and maintenance. Global supply chain problems have also delayed aircraft deliveries and upgrades, limiting capacity growth. Furthermore, the fatal crash of Flight 171 in June 2025, which killed 260 people, led to stricter regulatory oversight, safety checks, and a cutback in international flights.
Structural Weaknesses Exposed
The integration of Vistara has amplified Air India's structural challenges. The June 2025 crash of Flight 171, which claimed 260 lives, highlights operational risks. Preliminary reports suggest fuel control switches were moved to 'CUTOFF' after takeoff, though the cause, whether human error or an electrical issue, is still under investigation. This incident has led to increased regulatory scrutiny and harmed the airline's reputation. The extended closure of Pakistani airspace imposes a continuous financial strain that competitors, with their scale or flexibility, may manage better. The Indian Rupee's sharp 12.02% drop over the past year (as of May 2026) also increases Air India's debt and lease payments denominated in foreign currencies. Unlike IndiGo, which uses its strong market position and international income as a hedge, Air India's larger size post-merger increases its exposure to economic and geopolitical risks. Vistara's own history of struggling to achieve profitability adds another difficulty to Air India's recovery efforts.
Long-Term Growth Prospects Remain
Despite these financial pressures, Singapore Airlines and Tata Sons reaffirm their commitment to Air India's long-term turnaround, calling it a 'core component' of their plans. The Indian aviation market is poised for substantial growth, expected to become the world's third-largest by 2026 and grow at an average annual rate of 11.72% until 2034. Air India aims to utilize its expanded fleet and routes, with Europe identified as a key international focus. Nevertheless, Air India faces a demanding road ahead, needing to overcome ongoing geopolitical issues, currency fluctuations, complex integration challenges, and continued regulatory oversight.