New Delhi: Before Singapore Airlines (SIA) injects more capital into Air India, it would like to exert more control on its operations, sources close to the situation said.
Recently, Air India has called on its shareholders to provide it with a fresh infusion of $1.5 billion. Tata Sons holds the largest stake in Air India and it has also agreed to provide $1.1 billion, equivalent to its stake in the company. The remainder of the shares 25.1% is now in the hands of Singapore Airlines, which will be expected to sort out its slice of the funds.
But SIA first wants more power before consenting to the plan. The airline might seek additional voting rights at Air India’s board meeting and other objectives to reduce losses from the company, sources said. SIA has a significant stake in Air India, but it currently has only one seat on the board of the carrier. Its right to veto major moves such as mergers or buybacks is what gives it its stake, but otherwise it is barely influential on the day to day decisions of the board.
Why the cautiousness in this case is simple: Air India is making a lot of losses. The loss to the airline was $2.33 billion in the previous financial year and thus affected the Singapore Airlines’ profits as well. Tata has acknowledged that it might going to take as long as 10 years to rectify Air India’s affairs. Airline has recently also made changes to its top management, including naming Tewolde Gebremariam as the new CEO of Ethiopian Airlines, who previously served as the head of the African airline.
If Singapore Airlines decides to provide more funding, it will be subject to Air India’s business plans and the extent of SIA’s cash. The airline claimed it has sufficient buffers to finance this investment, therefore, it is not a need of other support.
In Singapore, this is a topic of discussion in politics. An Opposition leader is requesting that Temasek, SIA’s largest shareholder, refrain from using its capital to aid Air India. Temasek has confirmed that it will not have a direct say in this funding move, and will let Singapore Airlines make its own decision.
There is no final decision yet, and a number of companies, such as Tata or Air India, have yet to make a public statement.
