Key Takeaways:
Singapore has no domestic aviation market, so SIA and SATS live or die on overseas flying—COVID made that plain (SIA lost S$4.3bn in FY2020/21). SIA’s 49% of Vistara became 25.1% of the merged Air India in November 2024. A one-off S$1.1bn paper gain flattered FY2025; FY2026 profit then halved to S$1.18bn once a full year of Air India losses landed. Tata and SIA may put in up to US$1.5bn more after a US$2.33bn Air India loss. Parliament asked in September 2026 whether the bet is sound.
The author’s answer: it is painful now and still a bet on India. Air India can take India–West nonstops that never touch Changi; Changi keeps the high-yield eastbound legs (Australia, New Zealand, Southeast Asia) and gives SIA a counter to Emirates, Qatar, and Etihad. The model shifts from one hub to two.
Temasek (~S$500bn) treats this as T2030 “scale or shrink”: SATS buying Worldwide Flight Services for cargo scale; SIA–Air India as a second hub; greening a transport book that is about 82% of group emissions; keeping SMRT 100% at home. Judge the portfolio, not one airline year.
With no domestic aviation market, the city-state of Singapore must expand its aviation market overseas through strategic investments and partnerships with foreign airlines. The lack of a domestic aviation market was highlighted during the COVID pandemic when companies like Singapore Airlines (SIA) and Singapore Airport terminal Services (SATs) experienced huge losses.
Singapore Airlines (SIA) suffered its worst-ever financial crisis during the COVID-19 pandemic, recording a record full-year net loss of S$4.3 billion for the 2020/21 financial year and an additional net loss of S$962 million in FY2021/22 as global borders remained shut (SIA Press Release 02/21, 19 May 2021). Similarly, SATS Ltd suffered severe financial losses during the COVID-19 pandemic as global air travel ground to a halt, recording a net loss of S$6.3 million in 4Q FY2020 and plunging to a full-year net loss of S$78.9 million for FY2020/2021(Yahoo Finance, 27 May 202).
This article highlights the challenges that Singapore as a city-state faces to expand its aviation market and the need to invest for the long-term despite huge short-term losses to achieve its objective.
In 2013, SIA and Tata Sons entered a joint venture agreement and established Tata SIA Airlines Limited. They operated under Vistara, a full-service airline known for its newer facilities and higher quality. SIA, as a foreign entity in India, took the maximum allowed 49 per cent stake and Tata held 51 per cent. Vistara commenced flight operations as a premium, full-service carrier in January 2015. In January 2022, Tata Sons completed its acquisition of the state-owned Air India from the Indian government. Tata effectively owned Air India and Vistara, two separate full-service airlines.
In November 2022, SIA and Tata agreed to merge Vistara into Air India to avoid duplication. SIA, with its 49 per cent stake in Vistara, was guaranteed a 25.1 per cent stake in the enlarged Air India Group by also committing an initial cash investment of S$360 million. The India government officially cleared Singapore Airlines’ foreign direct investment into the consolidated Air India group in August 2024. Vistara merged into Air India in November 2024.
In November 2024, when Vistara airline was absorbed into Air India, SIA booked a massive S$1.098 billion one-time, non-cash accounting gain. This artificially inflated SIA’s FY2025 profits. In FY2026, the absence of this paper gain, coupled with absorbing a full 12 months of Air India’s operational bleeding (compared to just 4 months the year prior), created an optical cliff that slashed group net profits by over half (SIA Press Release, 02/26, 19 May 2026).
The financial impact of the Air India-Vistara merger (completed in November 2024) on Singapore Airlines (SIA) has materialized as a classic high-risk, multi-billion-dollar restructuring play. While SIA’s core business achieved record revenues of S$20.5 billion and an operating profit of S$2.4 billion for the financial year ended 31 March 2026, the Indian venture has introduced sharp volatility to the group’s bottom line. Table 1 below shows the dramatic decline in SIA’s net profit highlights the stark impact of this transaction.
Table 1: The Bottom-Line Swing in SIA Accounting: FY2025 vs. FY2026
Financial MetricFY2024/25FY2025/26YoY ChangePrimary DriverSIA Group Net ProfitS$2.78 BillionS$1.18 Billion-57.4%Absence of previous year’s non-cash merger gain + ongoing Air India lossesAir India Total LossN/A~S$3.8 billionN/AHigh turnaround costs, tech upgrades, airspace curbs, and a flight accidentSIA’s Share of LossMinimal (4 months)S$945.2 MillionN/AFully recognized 25.1% minority stake holding for the full year
Air India’s aggressive multi-billion-dollar restructuring (fleet renewals, cabin overhauls, IT systems) has required more liquidity than anticipated. In late August and September 2026, news broke that Air India is seeking up to US$1.5 billion in fresh equity from its owners (Tata Sons and SIA) following a massive US$2.33 billion annual loss, public scrutiny intensified.
The recent Parliamentary debate of September 2026 in Singapore raised concerns over SIA’s investment in Air India because Air India has faced multi-billion-dollar losses during its ongoing turnaround, which is expected to take up to a decade (CNA, 8 September 2026). SIA has committed significant capital including an initial investment and up to an additional S$498 million to maintain its 25.1% post-merger stake alongside Tata Sons.
As shown in table 1, SIA reported a 57.4 per cent drop in annual profit to S$1.18 billion, partly pressured by fuel costs and Air India-related losses. Whether SIA’s investment in Air India is “sound” depends on perspective whether as a short-term financial drain or a long-term strategic necessity. India is one of the fastest-growing aviation markets globally (Times of India, 14 May 2026). With a domestic home market limit in Singapore, SIA must expand overseas to capture international traffic.
The 25.1% stake gives SIA a direct foothold in India and strengthens Changi Airport’s global connectivity network by linking Indian traffic through Singapore. In the “Long Game” scenario, if Air India successfully completes its turnaround and turns a profit, a 25.1% share could yield massive returns for SIA’s bottom line without needing extra flights out of Singapore.
From a high-level investment standpoint, the Singapore government reiterated that Temasek’s performance cannot be judged on a single holding or foreign venture. As a mega-fund managing roughly S$500 billion, Temasek holds diverse investments with varying risks and time horizons. While the Air India turnaround presents immediate turbulence for SIA’s earnings, Temasek expects its portfolio boards to focus on commercial discipline rather than short-term political headwinds.
While the short-term losses in Air India captures the media headlines, it masks the T2030 strategic blueprint that Temasek is implementing through global transport and logistics investments targeted at transforming Singapore’s local transport champions into dominant global operators. Rather than acting as a passive investor, Temasek acts as a long-term steward, driving cross-border consolidation, network expansion, and supply chain decarbonisation. Temasek’s transport strategy is built around four distinct pillars:
First, the “Scale Up or Get Left Behind” consolidation strategy where Temasek has actively pushed its core Singapore-based transport giants to execute mega-mergers and acquisitions. The strategy is clear, as Singapore’s domestic market is too small, so its companies must hold dominant global positions to survive. In terms of air cargo &and ground handling, Temasek backed SATS in its major acquisition of Worldwide Flight Services. This transformed SATS from a regional player into the world’s largest air cargo handler, with operations expanding rapidly across Europe, the Americas, and the Middle East.
Second, developing the cross-border “Multi-Hub” aviation and port networks where Temasek’s strategy focuses on building global infrastructure hubs that anchor trade flows back to Singapore. In the Aviation sector, Temasek’s backing of Singapore Airlines’ (SIA) complex 25.1% investment in Air India is a classic play in its multi-hub aviation framework. Because SIA cannot grow infinitely out of Changi Airport alone, establishing a second domestic hub in a massive growth market like India is deemed a structural necessity, despite short-term financial turbulence.
Third, ensuring sustainable living and decarbonising the supply chain. Transport and logistics account for roughly 82% of Temasek’s total portfolio emissions (driven heavily by SIA, PSA, and Sembcorp). Consequently, its newer transport capital is heavily directed toward decarbonisation and green transport technologies.
Fourth, ensuring domestic stability and public infrastructure resilience through its global direct investments hunt for structural trends abroad, Temasek maintains 100% ownership of SMRT Corporation to operate Singapore’s national rail and bus networks. This segment of transport is treated entirely as an “essential service” asset—providing stable domestic infrastructure while shielding the public transport core from international market shocks. Table 2 below summarises Temasek’s key transport allocations.
Table 2: Summary of Key Transport Allocations
Temasek’s transport portfolio is strictly split into two main buckets within its organizational framework:
Portfolio SegmentKey Transport EntitiesStrategic IntentSingapore-Based Temasek Portfolio Companies (TPCs)Singapore Airlines, PSA International, SATS, SMRTAnchor Singapore as a premier global air/sea hub while scaling companies into international market leaders.Global Direct Investments (GDIs)Einride, Zipline, Mahindra ElectricCapture high-growth, disruptive future trends like autonomous transport, supply chain AI, and green logistics electrification.
In the case of investment in Air India, historically, if an Indian passenger wanted to fly to London or New York, SIA could only capture them if they were willing to fly backward to Singapore first. By using Air India’s expanding non-stop long-haul fleet, SIA now profits directly from the high-volume India-West traffic without touching Singapore soil.
Changi Airport acts as a feeder that drives high yielding Eastbound traffic, for destinations where Singapore sits naturally on the geography line like Australia, New Zealand, and parts of Southeast Asia. Air India can feed traffic directly into SIA’s massive network at Changi Airport. This protects SIA’s premium yields on these lucrative kangaroo routes.
The Air India investment could also be viewed as defensive moat strategy against Gulf Carriers because Emirates, Qatar Airways, and Etihad have dominated Indian international traffic by funnelling passengers through Dubai and Doha. The SIA-Air India alliance creates a formidable counterweight, offering Indian travellers a premium, Tata-backed alternative for both non-stop western routes and eastern transit options.
In conclusion, the Air India investment is high-risk and painful in the short term, but defensible as a calculated, long-term strategic gamble on the growth of the Indian aviation sector. While the investment lets SIA profit from passengers flying directly from India to Europe or North America (bypassing Singapore), it simultaneously feeds high-yield premium traffic into Changi Airport for routes heading to Australia, New Zealand, and East Asia. This two-way network synergy fundamentally changes SIA’s growth model from a hub-and-spoke constraint to a diversified dual-hub ecosystem.
About Dr. Faizal Yahya
Dr. Faizal Yahya is a Senior Research Fellow with the Institute of Policy Studies, Lee Kuan Yew School of Public Policy at the National University of Singapore. He is in the Governance and Economy Department. His current research interests includes, business transformation, human capital development, state led development, industrial policy, connectivity, foreign trade and economic regionalisation among other themes. Prior to entering academia, he was working in the Ministry of Foreign Affairs and the Ministry of Sustainability and the Environment.