Singapore Airlines poised to invest Rs 3194.5 crore in Air India

Singapore Airlines is poised to invest Rs 3,194.5 crore in Air India following the anticipated merger of Vistara with the Tata Group-owned airline.

Vistara was set up in 2015 as a joint venture with Singapore Airlines holding a 49 per cent stake in the Indian carrier and the Tata Group owning a majority 51 per cent share.

Singapore Airlines said that after the completion of the merger in November 2024, SIA’s additional investment is likely to total Rs 31,94.5 crore. According to the Singapore Airlines statement, further capital injections in Air India will be made after evaluating the airline’s funding demands and the financial options which will be available.

“The Group continues to strengthen its foundations with strategic initiatives including the Air India-Vistara merger and S$1.1 billion A350-900 retrofit programme,” Singapore Airlines said in a statement. The company reported a net profit of $742 million for the first half of the current financial year.

“The Air India-Vistara merger is expected to be completed within November 2024. For SIA, the consideration comprises its 49 per cent interest in Vistara and INR 20,58.5 crore in cash (equivalent to S$318 million), in exchange for a 25.1 per cent equity interest in the enlarged Air India. Upon the completion of the transaction, the Group expects to recognise a non-cash accounting gain of approximately S$1.1 billion,” Singapore Airlines said.

SIA further stated that “at the same time, it will also start equity accounting for its share of Air India’s financial results. The merger, announced by SIA and Tata Sons (Tata) in November 2022, includes an agreement for SIA to contribute its share of any funding previously provided by Tata prior to the completion of the merger, together with relevant funding costs, up to INR 5,020 crore(equivalent to S$880 million, based on the prevailing exchange rates at that time). This would allow SIA to maintain a 25.1 per cent stake in Air India.

The merger between Air India and Vistara was announced on 29 November 2022 and is scheduled to be completed on 11 November 2024. Once the merger is complete, Singapore Airlines will own a 25.1 per cent stake in the combined entity.

The merged entity will have a significant presence across all key Indian air travel segments including domestic, international, full-service, and low-cost operations. This will strengthen SIA’s multi-hub strategy, allowing it to continue participating directly in India’s large and fast-growing aviation market, the statement said.

Air India and SIA recently agreed to significantly expand their codeshare agreement, adding 11 Indian cities and another 40 international destinations to their network. This marks the first extensive expansion of codeshare arrangements between the airlines since 2010, offering customers enhanced travel options between Singapore and India, as well as beyond. Both carriers will continue to explore ways to deepen their commercial partnership.

The SIA Group revenue rose $335 million (+3.7%) to $9,497 million, with passenger flown revenue up $118 million and cargo flown revenue higher by $42 million. Increased competition and higher passenger capacity in key markets exerted pressure on yields, which fell 5.6 per cent. On the cargo front, the yield was 13.4 per cent lower amid the continued recovery in belly hold capacity, the airline said.