Air India Seeks $1.1 Bn Financial Support from Tata Group and Singapore Airlines After Crash

As it struggles with the aftermath and other issues following the fatal crash in Ahmedabad that claimed the lives of over 240 people, Air India is now requesting INR 10,000 crore ($1.1 billion) in financial support from its owners, Tata Sons and Singapore Airlines, according to Bloomberg. As per the report, which cited sources, Air India has requested financing to develop internal engineering and maintenance divisions as well as to modernise the carrier's systems and services.

The struggling airline is far from reaching its target of breaking even by the end of March of next year after suffering numerous setbacks. The challenges of surviving in India's aviation business, where a number of carriers have left after suffering losses, are highlighted by its appeal for more capital. With a market share of more than 64%, IndiGo's operator, InterGlobe Aviation, is now the sole profitable domestic airline.

Challenging Time of Air India

Airspace limitations imposed during armed clashes between India and Pakistan in May caused the carrier to undertake longer non-stop flights from India to the west, further undermining its chances of being profitable. A preemptive, coordinated attack on terrorist infrastructure in Pakistan and Pakistan-occupied Kashmir was carried out by the Indian military.

The strikes, known as "Operation Sindoor", were carried out in retaliation for the devastating Pahalgam terror attack on April 22 that killed 26 people, the majority of whom were tourists. Singapore Airlines and Tata Sons jointly own Air India. Singapore Airlines owns the remaining shares in the airline, while the Tata Group owns 74.9%. According to the report, any funding provided to the airline would be commensurate with ownership.

The owners will, however, determine whether the capital will be provided in the form of equity or an interest-free loan. On June 12, just after taking off from Ahmedabad, a Boeing 787 Dreamliner plane headed for London crashed, killing everyone but one person on board, significantly worsening the carrier's financial situation. Following the accident, a thorough system-wide safety audit was mandated by the Directorate General of Civil Aviation (DGCA), India's aviation regulator. Additionally, between June and August, the airline cut its widebody jet-operated foreign services by 15%, which further hurt its bottom line.

Air India Lost INR 4,000 cr Owing to Pak Airspace Restrictions

Although a number of uncertainties are impacting the overall demand for travel, Air India's CEO, Campbell Wilson, stated earlier this week that these uncertainties cannot cause the airline to fail. He added that following Pakistan's airspace limitations, the corporation is anticipated to suffer losses of INR 4,000 crore. By constructing hangars at strategic airports across the nation, the funding will enable Air India to expand its own engineering and maintenance capabilities, according to the report.