Singapore Airlines wants more control before fresh Air India funding
What's the story
Singapore Airlines is looking for more management control and stronger governance rights before it agrees to pump in funds into Air India, as per Reuters. The move comes after Air India's request for a $1.5 billion capital infusion from its owners. Tata Sons has approved its share of the funding, while Singapore Airlines holds a minority stake in the Indian carrier.
Negotiation
Negotiations ongoing on conditions for capital infusion
The conditions for the capital infusion are still being negotiated with Tata Sons, Air India's majority owner.
These could include enhanced board voting rights and targets for reducing losses.
However, Temasek, the majority shareholder of Singapore Airlines, won't be providing the funds directly or interfering in decisions related to Air India.
Evaluation process
Justifying further investment
Singapore Airlines has said its board will carefully assess any capital request, factoring in Air India's business strategy, group operating cash flow, and other capital needs.
The airline is under pressure to justify further investment in Air India after the latter posted a $2.33 billion loss for the financial year ended March.
This loss directly impacted Singapore Airlines's profits as well.
Influence constraints
Limited influence over Air India
Despite holding a stake of over 25% in Air India, Singapore Airlines has limited formal influence over the Indian carrier.
This is due to a 2022 merger agreement that merged its 49%-owned Indian carrier Vistara with Air India.
Under this agreement, it got only one board seat, which is currently occupied by its CEO Goh Choon Phong.
Funding controversy
Funding request has drawn criticism in Singapore
Air India's funding request has drawn criticism from an opposition lawmaker in Singapore, who has called for Temasek's funds not to be used to support the Indian airline.
However, Singapore Airlines has clarified that its investments in India have been and will continue to be funded by internal resources.
As of June-end, it had cash reserves of $8.29 billion.