Air India’s woes could depress Singapore Airlines’ profits for years, analysts warn

Shares in Singapore Airlines fell 3% on Friday as analysts warned that Air India’s continued losses could weigh on the group’s profits after a sharp fall in quarterly profits.

singapore airlinesThe company, also known as SIA, on Thursday reported an 82% drop in second-quarter profit. Net profit for the first half of the financial year also fell by 67.8% year-on-year to S$239 million, the company said.

However, the city-state’s flag carrier announced it would pay a special dividend of 10 Singapore cents per share annually over three financial years, totaling about S$900 million. An interim dividend of 5 Singapore cents per share for the half year ended September 30 is also due to be paid on December 23.

Tabitha Foo, equity research analyst at DBS Bank, told CNBC that SIA’s profitability is likely to remain weak in the near term due to Air India-related losses, yield pressures and volatility in the cargo market.

“Given the scale of the restructuring, any meaningful return to profitability for Air India is likely to take time, which will weigh on SIA’s earnings into FY26-27,” he told CNBC in an email.

Here’s how telcos performed in the three months to September compared to LSEG SmartEstimates. LSEG SmartEstimates emphasize more consistently accurate analyst forecasts.

Revenue: S$4.89 billion ($3.76 billion) vs. S$4.94 billion expected Net profit: S$52 million vs. S$181.47 million expected

Interest income decreased by S$42 million in the second quarter due to lower interest rates and lower cash balances due to dividend payments and loan repayments. Shares in associated companies, including Air India, took a S$295 million hit over the same period.

SIA holds a 25.1% stake in Air India following its November 2024 merger with Vistara, which is jointly owned by India’s Tata Sons. SIA started equity accounting for airlines from December 2024.

“Despite the ongoing challenges, SIA Group remains committed to working with our partner Tata Sons to support Air India’s comprehensive multi-year transformation programme,” the company said in a statement.

Air India also weighed on the group’s performance last quarter. According to Bloomberg, the airline had reportedly sought financial assistance of at least 100 billion rupees ($1.1 billion) from SIA and Tata Sons following the accident in June that killed more than 240 passengers.

Financial support for system upgrades and in-house engineering and maintenance capabilities will be proportionate to ownership, Bloomberg reported, citing people familiar with the matter.

Lorraine Tan, director of equity research at Morningstar, said investors need clarity on the nature of Air India’s losses and whether Singapore Airlines plans to inject more capital into the Indian airline.

“Our main concern, and we hope Singapore Airlines will provide more insight, is whether the losses are due to aircraft additions,” she told CNBC. “If most of the losses are related to ramp-up and therefore due to depreciation, then Air India could be at EBITDA break-even, and if so, that’s fine.”

SIA has expanded its commercial partnerships. In September, the airline launched a new codeshare service with Vietnam Airlines, strengthening its presence on Southeast Asia routes.

In October, we strengthened our joint venture with the United States. Lufthansa Group Adds Brussels Airlines and improves routes between Europe and Asia Pacific.

The airline said demand for air travel remains resilient as it heads toward a peak in the third quarter. Still, he cautioned that trends in air cargo remain uncertain amid changing trade policies and market volatility.

“The aviation industry continues to face challenges from geopolitical tensions, macroeconomic headwinds, inflationary cost pressures and supply chain constraints,” SIA said.

—CNBC’s Monica Pittorelli contributed to this article.