Temasek backs Singapore Airlines’ Air India investment amid growing scrutiny

Singapore’s state investor Temasek has expressed support for Singapore Airlines’ decision to invest in Air India, despite rising concerns over the Indian carrier’s financial struggles. Air India has been seeking around US$1.5 billion in fresh equity from its owners, Tata Sons and Singapore Airlines, according to Reuters. The 25.1% stake held by Singapore Airlines in Air India is currently the only significant share held by any foreign entity.

The revelation of the funding request has prompted criticism from opposition lawmaker Kenneth Tiong, who urged Temasek not to use its funds to bolster the loss-making airline. Meanwhile, a commentary in Singapore’s Business Times argued that Singapore Airlines is unlikely to exit its Air India stake, given Tata's potential as the sole plausible buyer. The commentary questioned the value of Temasek's 25.1% holding, which primarily provides a board seat and a share of the losses, without offering a clear strategic advantage.

In response to such criticism, Juliet Teo, joint head of portfolio development at Temasek Singapore, emphasized in a letter to the newspaper that the long-term perspective of Temasek’s investment in Singapore Airlines also extends to its stake in Air India. She acknowledged the transformation of Air India as a multi-year, complex process shaped by various industry challenges and external factors such as airspace disruptions, geopolitical developments, and fuel price volatility. Teo stated that such efforts require time and cannot be expected to follow a linear trajectory.

However, the letter did not address whether Temasek would support any additional capital contribution by Singapore Airlines to Air India. Since Tata took control of Air India in 2022, the airline has been undergoing a multibillion-dollar revamp. Air India and its budget subsidiary, Air India Express, posted combined losses of US$2.33 billion in the year to March, negatively impacting Singapore Airlines’ profits.

Singapore Airlines has indicated that its board will carefully evaluate any future requests for additional capital from Air India, taking into account the group’s other financial obligations and the airline’s overall business strategy.