Singapore Airlines, backed by the city-state’s multinational investment fund, Temasek, will likely be seeking greater influence over management and stronger governance rights before approving a capital injection into Air India.
As per a Reuters report, the proposed conditions, which would be negotiated with Air India’s majority owner Tata Sons, could contain greater board voting power and requirements for the Indian carrier to narrow its losses.
Temasek, Singapore Airlines’ majority shareholder, is looking to stay away from the entire process. Neither would it provide the capital itself nor intervene in the carrier’s decisions concerning Air India.
While Air India is seeking about USD 1.5 billion in fresh equity from its owners, majority holder Tata had already approved a USD 1.1 billion infusion, representing its pro-rata share. Singapore Airlines, on the other hand, holds the remaining 25.1% stake in the former state-owned full-service carrier.
In a statement, Singapore Airlines said its board would carefully evaluate any request for additional capital, taking into account Air India’s business strategy, the group’s operating cash flow, and its other capital requirements.
Singapore Airline’s tough stance also comes amid the airline facing growing pressure back home to justify the increase in its investment in Air India, which posted a USD 2.33 billion loss in the financial year ended March, weighing directly on the Singaporean carrier’s profits.
While Singapore Airlines has lost money on several past overseas investments, what makes its investment in the Indian carrier another tricky prospect is the fact that, as per Tata’s estimates, the business’ turnaround could take up to a decade.
Air India recently appointed former Ethopian Airlines head Tewolde Gebremariam as its new CEO to replace former Singapore Airlines executive Campbell Wilson.
Singapore Airlines has limited formal influence over Air India. Under a 2022 merger agreement that folded its 49%-owned Indian carrier Vistara into Air India, it received a single board seat, taken up by its CEO Goh Choon Phong.
However, it has a stake of over 25% in the airline, which gives it the power under Indian company law to block special resolutions covering major corporate matters, including mergers, share buybacks, and voluntary winding up.
An opposition Singaporean lawmaker called for Temasek’s funds to refrain from supporting Air India’s funding request.
As of now, Singapore Airlines’ investments in Air India will continue to be funded by its internal resources.
The venture possesses SUSD 10.48 billion (USD 8.29 billion) in cash reserves and SUSD 3.24 billion in undrawn credit lines as of the end of June.
Singapore’s Senior Minister K. Shanmugam has said while it is up to Singapore Airlines to make decisions on investing in Air India, Temasek expects the airline to make the moves “responsibly.”
It is worth mentioning that Temasek has a significant exposure to India, covering sectors including healthcare, financial services, consumer and technology. The investment giant has cited the South Asian country as a key growth market in its portfolio.