Air India's Financial Strain Hits SIA Profit

Singapore Airlines Group saw its net profit drop by 57.4% to S$1.184 billion for the fiscal year ending March 2026. A major reason was the heavy losses from its Air India investment, which alone posted a deficit exceeding S$3.56 billion (over Rs 26,700 crore). SIA CEO Goh Choon Phong pointed to external factors driving these losses, including supply chain issues, Middle East conflicts, and Pakistan's airspace closure forcing longer flight paths for Air India. The weakening Indian Rupee also increased costs.

SIA Bets on India's Aviation Growth

While facing immediate financial pressure, SIA views its Air India investment as a key move for long-term growth. The airline group aims to directly participate in India's fast-expanding domestic and international aviation markets to grow beyond Singapore. Air India, now owned by Tata Group, is undergoing a major transformation, including hiring over 14,000 staff since 2022. SIA believes this stake will help it access India's market, which is set to become one of the world's largest. The plan is for Air India to become a strong international competitor, balancing IndiGo's dominance in domestic routes.

Market Reaction to Air India's Drag

SIA's stock price has declined, down 8.9% over the past year and 5.0% in the last month, trading around S$6.30 to S$6.45. This performance indicates that investors are factoring in the risks associated with the Air India investment, balancing them against the airline's core operations.

Challenges Facing Air India and SIA

Air India faces ongoing issues that pose significant risks to Singapore Airlines. Although Pakistan's airspace is reportedly open at higher altitudes, many flights still require longer, costlier routes. The Middle East conflict has more than doubled jet fuel prices since late February 2026. While SIA has raised fares, these increases haven't fully covered the higher fuel costs, squeezing profit margins. India's aviation market is also highly competitive, with IndiGo dominating domestic routes at around 63.6%. This intense competition, especially from low-cost carriers, makes profitability difficult for all players. The substantial, recurring losses from Air India raise questions about how quickly it can turn around, and ongoing global instability adds further uncertainty to SIA's long-term goals.

Management Outlook: Patience Needed for India Strategy

SIA management expects surging fuel costs to continue impacting performance in the coming year, even while pursuing strong passenger demand. They acknowledge that transforming Air India will take a long time, requiring patience and ongoing investment to fully realize the potential of India's aviation market.