AAR

$SIA(C6L.SG)

I was reading an article from Mothership about Singapore Airlines recording nearly S$945 million in share of losses from its Air India investment in less than two years after taking a 25% stake in November 2024.

It prompted me to look back at SIA’s long history of overseas airline investments. 🤔

SIA is world‑famous for its five‑star service however its has track record of investing in foreign carriers which tells a much tougher story: a string of write‑offs, dilution and total wipeouts.

On paper, buying minority stakes in other airlines looked like a smart way to gain market access without the full cost of outright ownership.

In practice, it turned into a costly lesson in value destruction. Across four major deals over two decades, the pattern was remarkably consistent:

* 🇬🇧 Virgin Atlantic: Bought 49% for £600 million (~US$963M) in 1999; sold to Delta in 2012 for just US$360 million. Loss: ~S$1.1–1.2 billion (cash loss after write-downs).

* 🇳🇿 Air New Zealand: Bought a 25% stake for NZ426 million (~S$360–370M) in 2000, which was heavily diluted following the 2001 collapse of Ansett Australia. Exited in 2004 for NZ61.7M (~S70.5M). Loss: ~S$360–370 million.

* 🇦🇺 Virgin Australia: Built up a ~20% stake (totaling over A850M), which was wiped down to zero when the airline entered administration in 2020. **Loss: ~S500 million**.

* 🇹🇭 NokScoot: The 49% joint venture was liquidated in 2020, wiping out ~S$40M+ in initial equity and triggering a S$123.6 million one‑off impairment charge.

Add up those past four deals alone: ~S$2.4billion invested and ~S$1.9 billion+ lost 💸.

And now, the Air India merger has added another ~S$945 million share of losses in FY2025/26.

The key lesson: SIA succeeds when it maintains operational control ,think Scoot or SIA Engineering. It tends to struggle when it holds passive minority stakes.

So the big question: will Air India finally break this long‑standing pattern?

Not financial advice. Do your own DD.

$SIA(C6L.SG)

Singapore Airlines: A Tale of Two Airlines

Singapore Airlines (SIA) remains one of Asia’s strongest aviation franchises, but investors increasingly face a “two-speed” business. Its core Singapore Airlines and Scoot operations continue to generate healthy profits, supported by premium travel demand, disciplined capacity management and Changi Airport’s status as a global hub. However, SIA’s strategic stake in Air India introduces a less predictable growth engine.

Air India offers exposure to one of the world’s fastest-growing aviation markets, but the carrier remains in a costly turnaround phase, requiring fleet renewal, integration efforts and operational restructuring. While long-term upside could be substantial, near-term earnings volatility may dilute the consistency investors have historically associated with SIA.

For dividend-focused investors, this creates a trade-off. SIA’s strong balance sheet and cash generation support attractive payouts, yet future dividends may become less predictable if Air India requires additional capital or delays profitability. Capital-gains investors, however, may view Air India as an embedded growth option that could unlock significant value over the next decade.

A key external risk remains oil prices. SIA’s fuel-hedging programme provides partial protection against sudden spikes, cushioning near-term earnings. However, no hedge is permanent; a prolonged global oil crisis would eventually flow through to fuel costs. While SIA is better positioned than most peers to weather such a storm, sustained high energy prices would still pressure margins and potentially constrain future dividend growth.

Investment View: SIA is evolving from a dependable dividend airline into a hybrid income-and-growth story. Investors should expect stronger long-term growth potential, but with greater earnings and dividend variability than in the past.