Singapore Airlines hit by sharp decline in profit amid Air India turbulence

Singapore Airlines (SIA) has reported a steep 58.8 per cent year-on-year decline in net profit for the first quarter of the financial year 2025-26, weighed down heavily by its investment in Air India and broader industry headwinds. Net income dropped to S$186 million (US$145 million) in the April-June quarter, down from S$266 million (US$206.7 million) in the same period last year, marking its weakest financial performance in nearly a year. The poor results triggered a sharp reaction from investors, with SIA shares plunging as much as 8.7 per cent in early trading in Singapore, the largest intraday drop since August 2024.

The earnings slump is largely attributed to the airline’s 25.1 per cent stake in Air India, which it began consolidating into its financial statements following the completion of the Vistara-Air India merger in November 2024. This is the first full quarter that Air India’s financials have been accounted for within SIA’s consolidated results.

Air India losses weigh heavily on SIA

Air India has emerged as a major operational and financial drag on Singapore Airlines. The Tata-owned carrier reported a net loss of ₹10,859 crore (US$1.25 billion) in FY25, despite revenue of ₹78,636 crore (US$9 billion). This made it the largest loss-making entity within the Tata Group during the fiscal year. Singapore Airlines absorbed S$122 million (US$94 million) in losses from its associated companies during the quarter, most of which came from its share in Air India. This marked a significant reversal from the previous year, when such investments contributed positively to the bottom line.

Operationally, Air India continues to face turbulence following the June crash of Flight 171 shortly after takeoff from Ahmedabad, killing over 240 passengers and crew. The disaster, considered the worst in Indian aviation in over three decades, has triggered regulatory scrutiny and forced short-term capacity reductions. Investigations are ongoing, and the fallout is expected to affect performance in the coming quarters.

Broader industry pressures and strategic shifts

Beyond the impact from Air India, Singapore Airlines is also contending with multiple macroeconomic and industry-specific headwinds. Passenger yields declined 2.9 per cent year-on-year, cargo revenue was down 1.9 per cent, and interest income dropped 15 per cent. Competitive fare pressures, weaker returns on cash reserves, and muted demand in certain segments have further squeezed margins.

Despite these challenges, Singapore Airlines has outlined a cautious growth strategy. The carrier is adding new regional routes in Malaysia and the Philippines and has expanded its codeshare agreement with Air India. It maintains a positive long-term outlook, citing resilient travel demand across major markets, though it remains alert to geopolitical instability and economic volatility. The carrier's quarterly revenue increased marginally by 1.5 per cent to S$4.8 billion (US$3.73 billion), suggesting that core demand for air travel remains intact even amid broader global uncertainty.

Mixed market reactions

Analysts responded with a range of views. JPMorgan downgraded the stock to ‘neutral’ with a price target of S$7.00 (US$5.44), noting the results as a significant miss. Citigroup pointed to weaker core profitability, while Morgan Stanley projected some stabilisation in passenger yields in the coming quarters, which could ease pressure on earnings.

The airline industry globally is sending mixed signals. American Airlines recently lowered its earnings outlook due to aggressive fare discounts, while competitors like Delta and United Airlines have reported more stable demand trends. Against this backdrop, SIA’s results offer a glimpse into the growing complexity facing Asia-Pacific carriers in a volatile market.

Despite the ongoing headwinds, Singapore Airlines has reiterated its commitment to the Indian market. The group plans to continue supporting Air India’s transformation in collaboration with Tata Sons, even as the Indian carrier struggles with integration costs, operational inefficiencies, and stiff competition from domestic rival IndiGo, which now commands nearly two-thirds of India’s market share.