Singapore Airlines is expected to seek stronger safeguards and greater influence over Air India’s management before agreeing to put more money into the Indian airline, according to people familiar with the matter, reported Reuters.
The proposed conditions could include greater voting power on the board and targets for Air India to reduce its losses. These terms are expected to be discussed with Tata Sons, Air India’s majority owner.
Singapore Airlines owns a 25.1% stake in Air India. Its majority shareholder, Singapore state investor Temasek, is not expected to provide the funds or take part in decisions related to the Indian airline, the people said.
The discussions come after Air India sought around $1.5 billion in fresh equity from its owners. Tata has approved a $1.1 billion infusion, according to two people familiar with the matter. Singapore Airlines would be expected to contribute based on its shareholding.
Singapore Airlines said its board would carefully assess any request for additional capital. It said the decision would take into account Air India’s business strategy, the group’s operating cash flow and its other capital needs.
Temasek declined to comment on what it called speculation about the proposed conditions. Tata Sons and Air India did not respond to requests for comment.
The push for stronger terms comes as Singapore Airlines faces pressure to justify further investment in Air India. The Indian carrier reported a $2.33 billion loss for the financial year ended March, which directly affected Singapore Airlines’ profits.
Singapore Airlines has also incurred losses on some of its previous overseas investments. Tata said in July that turning around Air India could take up to 10 years.
Air India has appointed former Ethiopian Airlines chief Tewolde Gebremariam as its new CEO, replacing Campbell Wilson, a former Singapore Airlines executive.
Singapore Airlines currently has limited formal influence over Air India. Under the 2022 merger agreement that brought its 49%-owned Indian airline Vistara into Air India, Singapore Airlines received one board seat. Its CEO, Goh Choon Phong, holds that position.
However, its more than 25% stake gives Singapore Airlines the ability to block special resolutions on important matters under Indian company law. These include mergers, share buybacks and voluntary winding up.
The funding request has also drawn attention in Singapore. An opposition lawmaker there had called for Temasek’s funds not to be used to support Air India.
Singapore Airlines said its investments in India have been and will continue to be funded through its internal resources. It said it had S$10.48 billion in cash reserves and S$3.24 billion in undrawn credit lines at the end of June.
Temasek has publicly supported Singapore Airlines’ investment in Air India, saying it takes a long-term view of the decision.
Singapore’s Senior Minister K. Shanmugam also said on Saturday that any decision on investing in Air India would be taken by Singapore Airlines. He added that Temasek expected the airline to make investment decisions responsibly.
The responsibility for setting safeguards, governance conditions and performance targets for any new investment in Air India lies with Singapore Airlines, rather than Temasek, one of the people said.
Singapore Airlines’ broader strategy is to benefit from India’s long-term aviation growth while managing the risks involved in turning around a large airline. Temasek has also backed investments in Indian companies in the past, including hospital operator Manipal Health.
Temasek has investments across several sectors in India, including healthcare, financial services, consumer businesses and technology, and has identified the country as an important growth market.