Whalesbook
SIA Backs Air India's Value Despite Losses
Singapore Airlines (SIA) has confirmed its commitment to its 25.1 percent stake in the Air India Group by not recording an impairment loss. This keeps the investment valued at S$2.02 billion (approximately ₹13,000 crore) as of March 31, 2025. Announced on May 14, 2026, this decision signals a strong belief in India's fast-growing aviation sector, despite the immediate financial impact. Although Air India contributed S$846 million in losses to SIA's results for the fiscal year ended March 2026, SIA management stated the investment is still worth more than its book value. The airline's strategic priority is to secure a foothold in a key growth market, accepting near-term costs and reduced profits.
SIA's group net profit fell 57.4% to S$1.184 billion for FY2025/26. This was mainly due to a one-off accounting gain from the Vistara merger in the previous year and the current year's share of Air India's losses. However, the airline group's total revenue rose 5% to a record S$20.552 billion during the same period.
Air India's Financial Struggles and Rivals
The decision to avoid an impairment charge comes as Air India faces significant financial strain. Air India and Air India Express together are expected to have lost over ₹22,000 crore (about S$2.4 billion) in FY2025-26. This contrasts sharply with its main domestic rival, IndiGo, which made a profit of ₹8,172 crore in FY2024 and holds a dominant 60-64.4% of the Indian domestic market. In comparison, the Air India Group holds a much smaller 26.4-31% share.
IndiGo also appears more operationally efficient. Data since January 2025 shows 82.5% of analyzed Air India aircraft had recurring technical defects, versus 36.5% for IndiGo. These factors add to Air India's financial difficulties, leading it to cut international flights and stop services on unprofitable routes.
India's Aviation Growth Fuels SIA's Strategy
The Indian aviation market shows strong long-term growth potential, expected to expand at 11.72-12.03% annually, reaching between USD 28.96 billion and USD 45.59 billion by 2034. As the world's third-largest domestic aviation market, India's growth is driven by a growing middle class, infrastructure investment, and government programs like UDAN.
For SIA, which faces limits in its Singapore market, India is a vital route for international expansion and its multi-hub strategy. However, the sector faces challenges like supply chain issues, airspace limits, and high jet fuel prices, which have especially affected Air India's routes to Middle East markets. Geopolitical events and incidents such as the Boeing 787 Dreamliner issue also cause capacity disruptions.
Risks in SIA's Air India Investment
SIA's strategic bet on Air India faces significant risks. The airline group has a history of difficult past mergers and acquisitions, such as the failure of Ansett Australia and writing off its Virgin Australia stake. Turning Air India around is proving difficult and expensive, raising concerns about needing more capital beyond the initial investment. Analysts suggest SIA's ability to pay dividends could be reduced if it must offer more financial support to Air India.
SIA is embedding executives into key Air India roles to improve operations, engineering, and maintenance. However, the level of control and speed of turnaround depend on execution and existing cultural issues. Air India's dependence on routes to the volatile Middle East, along with weaker pricing power in India, raises the risk of ongoing losses.
Analysts View SIA's Air India Bet with Caution
Analysts have mixed views on SIA's strategy. Wall Street analysts forecast an average 1-year price target of SGD 6.93, suggesting potential gains from recent trading levels near SGD 6.28. The overall analyst recommendation is 'Hold.'
SIA embedding executives is seen positively for transferring operational knowledge, but execution remains a challenge. The long-term outlook depends on Air India successfully turning around and SIA managing the competitive, cost-pressured Indian aviation market. India's strategic importance for SIA's growth beyond its small home market justifies this high-stakes investment, despite its impact on short-term profits and shareholder returns.