Air India seeks fresh capital as heavy losses and costly turnaround put pressure on Tata and Singapore Airlines
Air India is seeking about $1.5 billion in fresh equity from its owners, Tata Sons and Singapore Airlines, as the airline looks for more capital to support its costly turnaround, Reuters reported on Tuesday, citing people familiar with the matter.
The funding request comes months after Air India and its budget airline Air India Express reported combined losses of $2.33 billion for the financial year ended March. The losses were more than double the previous year’s deficit.
According to the report, the proposed funding would be one of Air India’s largest publicly reported requests for shareholder capital since the Tata Group took control of the former state-owned carrier in 2022.
Funding likely to come in tranches
Air India wants the funds immediately, although the proposed capital infusion is likely to happen in tranches, the report said, adding that Singapore Airlines, which owns about 25 per cent of Air India, would need to contribute its share of the proposed funding for the investment to go through.
The airline is seeking the money in the form of fresh equity, the report said. Discussions are ongoing and no final decision has been taken on the request.
More from BusinessAir India’s turnaround faces headwinds
Air India’s financial position has been hit by several challenges as Tata works to rebuild the airline.
The carrier has faced disruptions to its international network because of the war between Israel and Iran. It has also been affected by Pakistan’s restrictions on Indian airlines using its airspace.
The airline is also dealing with the fallout from a deadly crash last year that killed 260 people.
At the same time, Air India is spending heavily to refurbish its existing fleet and improve its passenger experience. The airline has also placed large aircraft orders with Airbus and Boeing as part of its expansion plans.
Reuters reported earlier this year that Air India had sought to defer deliveries of hundreds of jets on order from Airbus and Boeing as Tata pushed the carrier to cut costs and reduce its losses.
The airline’s transformation involves more than fleet renewal. Tata is also working to overhaul Air India’s legacy technology systems, operational processes and organisational culture.
Tata Sons Chairman N Chandrasekaran has said the turnaround could take up to a decade, pointing to supply-chain disruptions and the scale of changes required across the airline.
More capital may be needed
The latest funding request comes at a crucial stage in Air India’s turnaround.
One of the sources told Reuters that Air India was expected to continue requiring capital infusions in the coming years.
That could make shareholder funding an important part of the airline’s strategy as it attempts to absorb the cost of rebuilding its fleet and operations while returning to profitability.
The request also comes as Tata Sons prepares for a leadership transition. Chandrasekaran is expected to step down as chairman in February after months of disagreements with the Tata group’s controlling charitable trust. Air India’s losses have been among the issues involved in those tensions, Reuters has reported.
For Tata and Singapore Airlines, the immediate challenge is to provide Air India with enough capital to execute its transformation while bringing its losses under control.
The proposed $1.5 billion equity infusion, if approved, would give the airline additional financial room but also underline the scale and cost of the turnaround still ahead.
