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September 2, 2026

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CNA Explains: Why is SIA staying invested in loss-making Air India, and can its long-term bet pay off?

Air India is seeking fresh capital as it undergoes a costly transformation. What does Singapore Airlines stand to gain from India’s aviation market, and what will it take for Air India to deliver sustainable returns?

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A record annual loss, billions of dollars being spent on a major overhaul and a request for US$1.5 billion in fresh equity from its owners.

These are among the challenges facing Air India as it attempts to rebuild itself into a major global airline, while external pressures including high fuel costs and geopolitical disruptions add to the strain on its finances.

Yet Singapore Airlines (SIA) continues to hold a 25.1 per cent stake in the Indian carrier and has said it remains committed to the long-term investment.

“We have never had any illusion that it is an easy path. Way back when we started the joint venture with our partner Tata Sons to set up Vistara, we knew at that point in time that it is a long game,” SIA CEO Goh Choon Phong said at a results briefing in May.

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So why is SIA prepared to stay invested despite Air India’s losses? How much more capital might it have to put in? And what would have to happen for the investment to pay off?

Why is SIA still betting on Air India?

The answer lies largely in the size and potential of India’s aviation market.

SIA has identified India as an important part of its “multi-hub strategy”. Its stake in Air India gives the airline direct exposure to that market and access to its domestic advantages, said Dr Rohit Kumar Rawat, assistant professor at Rajiv Gandhi National Aviation

India is already one of the world’s largest aviation markets, with passenger traffic having grown by about 10 per cent to 12 per cent annually over the past decade. Passenger traffic is projected to reach nearly 1.1 billion by 2040.

Air India’s scale also gives SIA access to assets that would be difficult for a new entrant to replicate, including its extensive domestic network, traffic rights and airport slots.

Delhi and Mumbai could develop into stronger international connecting hubs, allowing Air India to capture some of the traffic that currently flows through Middle Eastern and Southeast Asian hubs, Dr Rawat told CNA.

If Air India’s transformation succeeds, SIA would therefore stand to participate in the future value created by the enlarged airline, Dr Rawat added.

“In simple terms, SIA is investing in the future economics of the Indian aviation market, not the current financial performance of Air India,” he said.

That is also why Air India’s current losses do not necessarily mean the investment has failed.

SIA’s bet is that the value of the airline after its transformation could outweigh the money and time needed to get there.

When do Air India’s losses become too much?

Air India is seeking a further US$1.5 billion in support from owners Tata Sons and SIA just months after it posted a record annual loss, sources told Reuters.

An SIA spokesperson said last week the board would “carefully consider any requests for additional capital from Air India, taking into consideration the group’s other capital requirements and Air India’s business strategy”.

The question for SIA is therefore not simply whether Air India is losing money now, but how much it is prepared to invest before the potential returns no longer justify the additional risk.

DBS analyst Jason Sum said in July that further equity support by SIA was “inevitable”, with the airline likely to provide Air India with more funding over time.

But SIA also has to weigh the returns from Air India against alternative uses for its capital. “Every additional dollar invested in Air India has an alternative use,” Dr Rawat said.

SIA’s earnings have already been affected by its share of Air India’s losses. The Singapore carrier posted a net loss of S$76 million (US$59 million) in the first quarter of 2026, weighed down by higher fuel costs linked to the Middle East conflict as well as a larger share of losses from Air India.

This does not mean Air India has to become profitable immediately, Dr Rawat said, noting that the carrier is in the middle of a capital-intensive transformation, so some losses are expected during the restructuring phase.

“The key economic question is … whether the airline can convert its scale, network and market position into a sustainable competitive advantage and long-term profitability,” Dr Rawat said.

Tata Sons has previously said that Air India’s transformation could take up to a decade, potentially leaving SIA facing years of investment before the airline’s performance fully reflects the changes being made.

That means SIA will have to judge not just the eventual destination, but whether Air India is making enough progress along the way.

Harsh Vardhan, chairman of aviation consulting agency Starair Consulting, acknowledged that creating a new airline with access to a market base comparable to Air India’s would require a far greater investment.

“But SIA has to take a conscious view as to how long they will sustain that kind of help to Air India, and they need to come out with a definite claim of when they are going to reduce the gap and bring in profits,” Mr Vardhan told CNA.

The critical turning point is when additional funding and risks required from SIA start to outweigh Air India’s potential returns, said Dr Rawat.

“At that point, continuing to invest would destroy economic value.”

How realistic is a successful turnaround?

Air India has embarked on a major overhaul since Tata Group took control of the airline, but some aviation analysts remain sceptical about how quickly the carrier can turn around.

Mr Vardhan said an immediate turnaround is unlikely, particularly given Air India’s worsening financial performance and the broader disruption caused by the war in the Middle East.

“Air India, as yet, has shown no strategic action where it can inspire confidence that it is on a turnaround path,” he said, adding that the airline continues to face some of the same structural problems it had faced years ago.

Mark Martin, founder and CEO of aviation advisory and risk firm Martin Consulting, also questioned whether SIA should continue committing capital to the airline.

“My question here is – is it really worth it? Is it worth it for SIA to plough in so much money into Air India just because they want to be there?” he asked.

Mr Martin also noted that the final report into last year’s deadly Air India crash is due in October. The findings could have implications for Air India’s operations and reputation, depending on what investigators conclude.

An Air India Airbus A350 aeroplane is displayed at Wings India 2024 aviation at Begumpet airport, Hyderabad, India, on Jan 18, 2024. (File photo: Reuters/Almaas Masood)

However, the picture is not entirely negative.

DBS’ Sum noted that Air India’s management had reported steady operational progress, including improvements in customer experience through cabin retrofits, service enhancements and lounge upgrades.

Bloomberg reported in April that SIA had also moved some of its employees into Air India, with executives taking on key roles across flight operations, engineering and maintenance – areas in which SIA has extensive expertise.

Air India has also appointed Tewolde Gebremariam as its new CEO, replacing Campbell Wilson, who resigned earlier this year amid the airline’s losses and heightened regulatory scrutiny.

Mr Gebremariam spent more than a decade leading Ethiopian Airlines, turning it into one of Africa’s largest and most profitable airline groups.

The appointment could give Air India another experienced airline executive as it tackles the next stage of its transformation.

What needs to change at Air India?

Air India’s challenge goes beyond adding new aircraft or improving its cabins.

The airline has undergone multiple mergers and is still integrating different operations, systems and organisational cultures.

Mr Vardhan said its management and organisational structure needed to be streamlined so that the airline could operate as a more cohesive entity.

“It’s a management failure … and they are giving excuses that it will take 10 years or more to streamline the culture,” he explained.

Mr Martin similarly argued that there was no quick fix to Air India’s problems, and that the airline needed to address issues at a fundamental level.

“They’ve not fixed the real issues that are at the foundation of Air India. You’ve just tried to beautify it up, and that’s not going to work,” he told CNA.

While SIA’s expertise can help Air India improve areas such as network planning, revenue management, premium services and international operations, it cannot single-handedly transform the carrier.

That is because SIA is a significant minority shareholder, rather than the controlling owner.

Tata Sons remains the controlling shareholder, meaning the ultimate direction of Air India’s transformation depends on the wider ownership and management structure.

How does Air India benefit from SIA’s investment?

The relationship is not simply about SIA providing money to Air India.

SIA brings two key benefits to Air India – stronger network connectivity and industry expertise, Dr Rawat said.

Its Singapore hub can complement Air India’s domestic network, creating additional passenger flows between India, Southeast Asia and other international destinations.

SIA can also contribute expertise in areas such as network planning, revenue management, premium services and international operations, Dr Rawat added.

The presence of SIA CEO Goh Choon Phong on Air India’s board provides a formal channel for the Singapore carrier to participate in strategic decisions.

But its 25.1 per cent stake also limits how much it can control.

“SIA can help improve Air India’s productivity and network efficiency, but the ultimate success of the transformation depends on the entire ownership and management structure,” Dr Rawat said.

So, does SIA have a good bet?

The key indicators will be whether Air India’s operational performance continues to improve, whether its financial losses narrow and whether the airline can eventually generate sustainable returns from its scale, network and access to India’s growing aviation market.

SIA is therefore not simply betting on Air India’s current performance. It is betting that the airline can be transformed into an asset whose future value justifies the cost of getting there.

Want an issue or topic explained? Email us at digitalnews [at] mediacorp.com.sg. Your question might become a story on our site.

Source: CNA/co(rj/gs)

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