Singapore Airlines , backed by state investor Temasek, is expected to seek greater influence over management and stronger governance rights before approving a capital injection into Air India, said two people familiar with the matter.
The proposed conditions, which would be negotiated with Air India’s majority owner Tata Sons, could include greater board voting power and requirements for the Indian carrier to narrow its losses, the people said.
Temasek, Singapore Airlines’ majority shareholder, would neither provide the capital itself nor intervene in the carrier’s decisions concerning Air India, they added.
The discussion of conditions comes after Reuters last month reported Air India was seeking about $1.5 billion in fresh equity from its owners.
Two other people said Tata had approved a $1.1 billion infusion, representing its pro-rata share. Singapore Airlines holds the remaining 25.1% stake.
All four of the people declined to be identified as the information is not yet public.
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.
Temasek declined to comment on “speculation with respect to the points on Temasek.”
Tata and Air India did not respond to requests for comment.
Limited influence
The push for tougher terms reflects growing pressure on Singapore Airlines to justify increasing its investment in Air India, which posted a $2.33 billion loss in the financial year ended March, weighing directly on the Singaporean carrier’s profits.
Singapore Airlines has lost money in several past overseas investments, and Tata said in July that Air India’s turnaround could take up to a decade. The Indian carrier has 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.
Its stake of more than 25% does, however, give it the power
under Indian company law to block special resolutions covering
major corporate matters, including mergers, share buybacks and
voluntary winding up.
Air India’s funding request drew a call from an opposition
lawmaker in Singapore for Temasek’s funds not to be used to
support the Indian airline.
Singapore Airlines said on Tuesday that its investments in
India have been and will continue to be funded by its internal
resources, noting it had S$10.48 billion ($8.29 billion) in cash
reserves and S$3.24 billion in undrawn credit lines as of
end-June.
Temasek last month publicly backed Singapore Airlines’
investment in the Indian carrier, saying it took a long-term
view of the decision.
Singapore’s Senior Minister K. Shanmugam said on Saturday
any decision to invest in Air India lay with Singapore Airlines,
and that Temasek expected the airline to make investment
decisions responsibly.
The onus for setting safeguards, governance expectations and
performance targets for any additional investment in Air India
lies with Singapore Airlines, not Temasek, one of the people
said.
Singapore Airlines’ strategy is to benefit from India’s
long-term aviation growth while managing the risks of a major
airline turnaround, the person added, noting that Temasek backed
similar bets on Indian companies in the past, including hospital
operator Manipal Health.
Temasek has built up significant exposure to India across
sectors including healthcare, financial services, consumer and
technology, and has cited the country as a key growth market in
its portfolio.
Source: Khaleej Times