SIA's Air India investment internally funded, not paid for by Singaporeans: Jeffrey Siow

Singapore Airlines' (SIA) investment in Air India is funded from its own internal earnings, not by Singaporeans as Workers' Party (WP) MP Kenneth Tiong had publicly insinuated, said Minister for Transport Jeffrey Siow in Parliament on Tuesday (Sept 8).

He was responding to both a parliamentary question filed by the first-term Aljunied MP, and his public statement — expressing concerns in SIA's investment.

The WP MP had asked the transport minister whether SIA's losses from, and carrying amount in its foreign associates, have been assessed against the airline's capacity to provide essential transport services.

He also asked if such losses would trigger SIA's notification duty prescribed under the Civil Aviation Authority Act of Singapore, as a designated operating entity.

No doubt in SIA's ability to deliver air services

Responding to Tiong's question, Siow stressed that the airline's status as a designated operating entity is not a financial reporting rule.

Instead, the law — introduced in April last year — is intended to prepare Singapore for extreme scenarios and guard against the risk of malicious actors gaining control of and adversely influencing key transport entities in the Republic.

And on the airline's ability to deliver air services in Singapore, Siow said that the relevant question is whether any losses has reached the point of materially constraining its resources.

"That is a judgement based on facts, and we are nowhere close to this scenario," the minister highlighted.

He added: "At present, there is no reason for us to doubt SIA's ability to deliver air services in Singapore."

He pointed out that SIA's core business had one of its strongest years, posting record revenue, high operating profit margins, and a record number of passengers carried. 

No funding requests for 54 years except during Covid-19

In his supplementary question, Tiong stated that while he supports ability to make its own decisions, he will not support any further cash infusions from Temasek.

He noted that Temasek, whose capital is part of Singapore's past reserves, had underwrote the airline's $8.8 billion recapitalisation in 2020, during the Covid-19 pandemic.

"And this House was told the Government would provide more direct support if necessary. If Air India goes wrong, will the Government rule out doing so again?" the MP asked.

He cited Indigo's present share of air services market in India and the possibility of two airport operators potentially becoming airline operators as examples of risks.

"We ask because through the reserves, Singaporeans are SIA's stakeholder of last resort, and the stakeholder of last resort needs to know where the line is."

The national carrier has not sought any funding from Temasek apart from during Covid-19, the transport minister said, adding that the situation then was "fundamentally different". 

"Aviation was at a standstill. Flights were grounded all across the world. Passenger traffic through Changi had fallen by more than 90 per cent and SIA had to cut its scheduled capacity by 96 percent — SIA's incoming revenue was almost zero, and was losing $400 million a month — 4.3 billion that year, to be exact. 

"And most importantly, SIA did not know or have any control over when that situation was going to end," Siow explained.

The minister pointed out that Temasek eventually made a good return from the equity and bonds that it purchased from SIA.

He also corrected any impression that the Government had provided significant support to SIA, highlighting that the support was instead for the whole of aviation sector.

Investment a question for SIA, shareholders to answer

On SIA's investment in Air India, the transport minister said that whether it proves valuable is ultimately a question for SIA and its shareholders to answer.

"The member has insinuated that Singaporeans are somehow paying for the Air India investment. This is not the case. SIA is a listed company that funds its investments from its own earnings," Siow clarified.

In a separate statement from SIA, the group reported that as at June 30 this year, it had $10.48 billion in cash reserves, comprising $9.1 billion in cash and bank balances and $1.38 billion in fixed deposits.

It also has access to $3.24 billion in committed lines of credit, all of which remains undrawn. 

"Members may ask difficult questions, but the claims we make must be grounded in facts, not exaggerated speculation that creates needless public alarm. 

"Singaporeans deserve public debate that examines risks honestly, explains them responsibly, and remains anchored on truth and logic," the minister added.

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