Air India runway in Singapore promises profit, pits


For decades, Singapore Airlines Ltd. has wanted to take pole position in India, which will be the world’s third-largest aviation market by mid-decade, if not sooner. Now that the opportunity to own 25% of the nation’s largest international and second-largest local carrier has come, chief executive Goh Choon Phong is happy to write a check for $250 million.

But India’s siren song can also be treacherous. Its heavily regulated sectors, such as telecommunications and aviation, have a history of being unpredictable. Singapore Telecommunications Ltd. was lucky in its choice of partner. Bharti Airtel Ltd. remains a solid No. 2 in India’s wireless market after years of intense turmoil. Goh would hope for the same stability from his partner, the 154-year-old Tata group – perhaps even more, given the aviation industry’s natural tendency to destroy capital.

All that is in the future though. Right now, it’s handshake time. Vistara, a joint venture of the Tata Group and SIA, is being merged with Air India. The loss-making national carrier went to the local conglomerate when New Delhi sold it last year. Tata will now own 74.9% of the merged entity; Singapore Air will settle just over $250 million for 25.1%. An expansion is also in the cards. Air India CEO Campbell Wilson, a veteran of Singapore Air, wants to triple its fleet in five years. This acquisition, among the most aggressive in the industry after the pandemic, could increase SIA’s investment by an additional $615 million. The Indian side will bring proportionately more.

Covid-19 has highlighted the danger of relying too much on the single market. A multi-hub strategy, where Singapore Air-owned airlines will benefit from demand outside the small city-state, may not provide a surefire insurance against a global pandemic when everything comes to a standstill once time. But it provides a risk reduction in the reopening phase. The company enjoys the backing of a triple-A rated government and was lucky: authorities in its home market wanted to lift travel restrictions as soon as possible. Hong Kong-based rival Cathay Pacific Airways Ltd. and Chinese carriers were not as fortunate. As a result, SIA is in an expansionary, deal-making mode, while Cathay is only now seeing “a bright light at the end of the tunnel”.

Wilson, originally from New Zealand, is new to both the job and the field – he arrived in June as the first foreign-born boss in Air India’s history. Even as it completes its merger with Vistara, its two shareholders will be looking to repeat their success at Scoot, the Singapore-based short-haul carrier. The immediate task is to shake off InterGlobe Aviation Ltd.’s Indigo, which has a 57 percent share of India’s domestic aviation market. Middle Eastern carriers such as Emirates and Etihad Airways PJSC dominate travel to and from the country through their hubs in Dubai and Abu Dhabi respectively.

Wilson’s other challenge will be managing different cultures. As a 75% shareholder, Ratan Tata, the group patriarch, will want his executives to be in the cockpit, if not the pilot’s seat. After all, a more passive approach got the 84-year-old aviation enthusiast nowhere. Even before the virus broke out, the $128 billion conglomerate had notably failed to make money from the two ventures it started in the middle of the last decade — Vistara, a full-service carrier targeting frequent travelers business, and AirAsia India, a no Flowery airline, with AirAsia Group Bhd. Father from Malaysian tycoon Tony Fernandes.

Management’s approach may be different this time around. But whether the outcome is more rewarding – for both Tata and Singapore Air – will crucially depend on how the local partner navigates the policy landscape. That’s where the big pits on the track can lurk.

More from Bloomberg Opinion:

• Airplanes need more than a pilot and a digital dog: Tim Culpan

• Boeing and Airbus should not rule out a Chinese rival: Thomas Black

• Singapore Airlines’ 20-year flight to India: Andy Mukherjee

(1) The Tata Group has since increased its stake in AirAsia India to nearly 84%.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andy Mukherjee is a Bloomberg Opinion columnist covering industrials and financial services in Asia. He previously worked for Reuters, Straits Times and Bloomberg News.

More stories like this are available at

Leave a Reply

Your email address will not be published. Required fields are marked *