Singapore Airlines to seek tougher terms for any fresh Air India funding, sources say

Singapore Airlines, under the stewardship of its majority shareholder Temasek, is poised to negotiate more substantial governance and management rights before committing additional capital to Air India, according to sources familiar with the matter. These conditions, to be discussed with Air India's majority owner Tata Sons, may encompass increased board voting power and demands for the Indian airline to reduce its losses.

Temasek, Singapore Airlines' primary investor, neither plans to inject capital nor interfere in Air India's decision-making concerning the proposed funding. The prospect of these conditions arose following Reuters' report last month that Air India sought around $1.5 billion in fresh equity from its owners. Tata has reportedly approved a $1.1 billion infusion, representing its pro-rata share, with Singapore Airlines holding the remaining 25.1% stake.

Both entities declined to comment on the speculation. This push for tougher terms stems from growing pressure on Singapore Airlines to justify its increasing investment in Air India, which incurred a $2.33 billion loss in the financial year ending March. The airline's past overseas ventures have also resulted in losses, and Tata previously stated that Air India's turnaround might take up to a decade.

The Indian carrier recently appointed Tewolde Gebremariam, a former Ethiopian Airlines executive, as its new CEO to succeed Campbell Wilson, who was previously from Singapore Airlines. Singapore Airlines' influence over Air India is limited. As part of a 2022 merger agreement that merged its 49% stake in Vistara into Air India, it received only a single board seat, currently held by its CEO, Goh Choon Phong.

However, its stake in Air India allows it to block special resolutions on major corporate matters under Indian company law. Singapore Airlines' investments in India have been and will be funded by its internal resources. As of end-June, it held S$10.48 billion in cash reserves and S$3.24 billion in undrawn credit lines. Temasek recently backed Singapore Airlines' investment in Air India, emphasizing a long-term perspective.

Sen. K Shanmugam of Singapore affirmed that the decision to invest in Air India rests with Singapore Airlines, and that Temasek expects the airline to make responsible investment decisions. The onus for establishing safeguards, governance expectations, and performance targets for any additional investment in Air India lies with Singapore Airlines, not Temasek.

Singapore Airlines aims to capitalize on India's long-term aviation growth while managing the risks associated with a major airline turnaround. Temasek has diversified its investments across various sectors in India, including healthcare, financial services, consumer goods, and technology, viewing the country as a key growth market in its portfolio.