Air India-Vistara merger enters turbulent phase as losses hit Singapore Airlines

Air India’s mounting financial troubles have begun weighing heavily on Singapore Airlines (SIA), marking a difficult first full year for the merged Air India-Vistara entity and underscoring the operational pressures facing India’s aviation sector.

The Tata Group-owned carrier reported a full-year loss of $2.79 billion (₹26,798 crore), according to disclosures made by Singapore Airlines in its annual financial statement. The losses translated into a $743 million impact on SIA’s earnings, contributing to a sharp fall in the Singapore carrier’s net profit despite record operating performance.

Singapore Airlines, which owns a 25.1% stake in Air India following the completion of the Air India-Vistara merger in November 2024, said its net profit for FY26 dropped 57.4% year-on-year to SGD 1.18 billion ($930 million). At the same time, operating profit rose 39% to SGD 2.4 billion ($1.89 billion).

In its statement, SIA attributed the decline in profitability to “the absence of a prior year one-off accounting gain, coupled with the share of full year losses from Air India.”

First full year of merger impact surfaces

FY26 marks the first complete financial year in which Singapore Airlines accounted for Air India’s losses after integrating Vistara into the Air India business.

In FY25, SIA had only absorbed four months of Air India’s financial performance following the merger. That year, the airline had also benefited from a SGD 1.098 billion ($866 million) non-cash accounting gain linked to the merger transaction, cushioning the overall impact.

The latest figures now offer the clearest indication yet of the scale of financial restructuring required at Air India as Tata Group attempts to rebuild the airline into a globally competitive full-service carrier.

The merger between Air India and Vistara was positioned as a strategic consolidation move aimed at strengthening fleet scale, international connectivity and premium market positioning. However, the integration has coincided with one of the most volatile operating periods for the aviation industry in recent years.

Multiple shocks pressure Air India operations

Air India’s losses widened during a year marked by operational disruptions, geopolitical tensions and weakening international demand.

Among the biggest challenges faced by the airline were:

• The impact on passenger demand following the June 12, 2025 Ahmedabad crash
• Higher fuel costs driven by elevated aviation turbine fuel prices
• Closure of Pakistani airspace for Indian carriers
• Airspace restrictions across parts of West Asia amid regional conflict
• Weakening travel demand from the United States market
• Longer flight detours to North America, increasing operational costs

Industry analysts have noted that rerouting flights because of restricted airspace significantly increased fuel burn and crew utilisation costs on key long-haul sectors.

According to the company, some North America-bound flights were forced into detours extending journey times by five to six hours, placing additional pressure on aircraft scheduling and profitability.

International network cuts deepen concerns

The financial stress has already triggered network reductions across Air India’s international operations.

On May 13, the airline announced a 27% reduction in flights across its international network, citing soaring fuel costs and operational disruptions. The cuts extended beyond west-bound routes and affected services to SAARC countries, Southeast Asia and the Far East.

Separately, the airline also moved to reduce North American operations by around 40%, reflecting the growing strain on long-haul economics.

The scale of the reductions has renewed debate around the sustainability of aggressive international expansion plans among Indian carriers amid volatile geopolitical and fuel conditions.

Singapore Airlines reiterates long-term commitment

Despite the financial setback, Singapore Airlines said it remained committed to its partnership with Air India and pointed to ongoing transformation initiatives at the airline.

In its statement, SIA said Air India continues to face “industry-wide supply chain constraints, airspace restrictions, constraints on operations to its key Middle East markets, and elevated jet fuel prices.”

However, the Singapore carrier added that Air India was making progress in:

• Fleet renewal programmes
• Aircraft retrofit initiatives
• Customer experience upgrades
• Operational performance improvements

The comments suggest SIA continues to view the Air India investment as a long-term strategic play tied to India’s rapidly expanding aviation market, even as near-term financial pressures intensify.