Post by : Rameen Ariff

Singapore Airlines (SIA) has experienced a significant decline in its earnings for the September quarter, primarily due to escalating losses from Air India, in which SIA holds a 25.1% stake. This financial downturn occurs despite a steady demand for travel and record passenger volumes across SIA’s extensive network.

Impact of Air India’s Financial Struggles

The net income for SIA plummeted 82% compared to the previous year, landing at S$52 million. This downturn is mainly attributed to the increased losses from Air India, which began affecting SIA’s financial statements following the implementation of equity accounting in December 2024, after the integration of Vistara into Air India.

In the first half of the year, SIA recorded a decrease of S$417 million in its share of results from affiliated companies, predominantly due to Air India’s poor financial performance. The Indian airline is contending with rising operational costs, capacity challenges, and a slow recovery trajectory.

Tata Sons reported that Air India’s consolidated losses soared by 48% in FY25, reaching ₹10,859 crore—this marks the highest loss among entities within the Tata Group. Notably, this financial burden increases even as India’s aviation sector continues to grow.

Tragic Air Crash Adds Pressure on Air India

Air India is also facing ongoing difficulties stemming from a devastating crash in June that resulted in the deaths of 260 individuals, one of the most tragic events in recent aviation history. This incident has intensified the airline's operational and financial pressures, leading it to seek over ₹10,000 crore in assistance from Tata Sons and Singapore Airlines.

In FY25 alone, both stakeholders contributed ₹9,558 crore to Air India for necessary capital expenditures and restructuring initiatives, with a significant portion accounted for by SIA.

SIA Maintains Investment Focus Amid Losses

Despite these setbacks, SIA affirmed its unwavering support for Air India, emphasizing that the investment is a crucial element of its multi-hub strategy. Access to India’s rapidly growing aviation market remains integral to SIA's long-term vision.

Air India is currently undergoing a five-year transformation strategy aimed at renewing its fleet, streamlining operations, and improving services. SIA has indicated its commitment to assist these initiatives as Air India works towards revamping its operations.

Core Performance Resilience at SIA

Notwithstanding the Air India impact, SIA’s overall performance remained robust. The group reported a 2.2% increase in quarterly revenue, amounting to S$4.9 billion, fueled by consistent demand for air travel.

The airline recorded a historical high of 10.5 million passengers during the quarter. Both SIA and its low-cost subsidiary Scoot operated flights with high occupancy rates, with Scoot achieving load factors exceeding 90% for six consecutive months, largely benefitting from Jetstar Asia’s cessation in July.

Operating profit surged nearly 23% to S$398 million, aided by declining fuel prices and stable operating expenses. However, passenger yields contracted by 3% to 9.8 Singapore cents per kilometer.

Future Outlook: Strong Demand with Ongoing Risks

SIA anticipates continued strong travel demand as it approaches the third quarter; however, the enduring financial challenges posed by Air India pose significant risks to the group’s earnings. The success of Air India’s transformation strategy will be vital in determining the future profitability stability for SIA.

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