CNA Explains: Beyond the Air India stake, how have SIA's other investments fared?

Singapore Airlines (SIA) has made several investments in other airlines, but many have not been successful. The company's 25.1% stake in Air India is under scrutiny after the Indian carrier requested an additional US$1.5 billion in support following a record annual loss. This is the latest in a series of "underwhelming" investments that SIA has made in other airlines.

In 1999, SIA paid £600 million (around US$1.6 billion in today's money) for 49% of Virgin Atlantic, hoping it would secure transatlantic routes. However, the investment did not yield the expected results, and SIA sold its stake for £224 million in 2012. SIA's 25% stake in Air New Zealand was also diluted after the New Zealand government intervened to rescue the airline. The company sold its 6.3% stake in Air New Zealand for US$336 million in 2004.

SIA's subsidiary Tiger Airways also faced losses with its Australian arm, which was later acquired by Virgin Australia in 2014. The budget carrier Scoot, another SIA subsidiary, formed a joint venture with Nok Airlines in 2014 but liquidated NokScoot in 2020 amid the pandemic, incurring a S$123.6 million loss.

DBS Group Research analyst Jason Sum noted that SIA's track record of investing in other airlines has been "pretty underwhelming financially." The recent failures have been partly due to the COVID-19 pandemic, but not all investments were impacted by external shocks. Sum emphasized that SIA often takes minority stakes without full strategic or operational control, meaning it shares the financial downside without controlling fleet, network, capacity, costs, or management.

Airlines are challenging investments due to their capital intensity, cyclical nature, volatile fuel prices, and heavy regulatory constraints.