Singapore Airlines (SIA) will make an additional investment of Rs 3,194.5 crore in Tata Group-owned Air India following the merger of Vistara in November 2024. The merger, which was announced on November 29, 2022, and is expected to be finalised by November 11, 2024, will give Singapore Airlines a 25.1 percent stake in the expanded Air India.
Vistara, the full-service carrier that began operations in January 2015, is a joint venture between Tata Group and Singapore Airlines, with SIA holding a 49 percent stake. Under the merger agreement, SIA’s contribution includes its 49 percent interest in Vistara along with Rs 2,058.5 crore (SGD 498 million) in cash for a 25.1 percent equity stake in the combined entity.
Once the merger is completed, SIA expects to record a non-cash accounting gain of approximately SGD 1.1 billion and will start accounting for its share of Air India’s financial results.
The merger also includes an agreement for SIA to contribute any funding provided by Tata Group to Air India before the merger is completed, along with associated funding costs up to Rs 5,020 crore, to maintain its 25.1 percent stake.
The additional capital injection by Singapore Airlines is expected to be Rs 3,194.5 crore, based on Tata’s prior funding to Air India. This investment will be made after the merger is completed and is set to occur within November 2024 through a subscription to new shares of Air India, according to a release from the company.
Looking ahead, SIA has indicated that future capital injections will be assessed based on Air India’s requirements and available funding options, the release issued on November 8 while presenting its results said.
The merger of Vistara with Air India represents a major consolidation in the rapidly growing Indian aviation market. Following the merger, SIA expects the combined entity to have a significant presence across key Indian air travel segments, including domestic, international, full-service, and low-cost operations. This move will further strengthen SIA’s multi-hub strategy, reinforcing its participation in India’s large and expanding aviation sector.
As part of the merger, Air India and Singapore Airlines recently agreed to expand their codeshare agreement, adding 11 Indian cities and 40 international destinations to their network.
Singapore Airlines reported a 48.5 percent drop in net profit for the first half of the fiscal year, falling to SGD 742 million ($561.65 million), down from SGD 1.44 billion in the same period last year. Despite strong travel demand, especially in the second half, the airline’s performance was impacted by inflationary pressures, geopolitical tensions, and rising costs, particularly for fuel and other non-fuel expenses.
Total expenses for the group, which includes both Singapore Airlines and budget carrier Scoot, rose 14.4 percent to SGD 8.7 billion, putting further strain on profitability. Revenue grew by a more modest 3.7 percent year-on-year to SGD 9.5 billion, while passenger yield fell by 5.6 percent. Additionally, the airline’s passenger load factor dropped to 86.4 percent, down from 88.8 percent in the same period last year.
(With inputs from PTI)
