Singapore Airlines earnings drop 59% as Air India weighs on results

Singapore Airlines (SIA) opened to its sharpest single-day stock decline in nearly a year, after reporting a 59% fall in first-quarter profit. But this was not merely a result of sector-wide margin compression. At the heart of the earnings disappointment lies a deeper and more persistent macro-fragility: the exposure to associate risk in India’s aviation market.

The headline figures were blunt. Net profit slid from S$452 million to S$186 million in the June quarter. Markets responded swiftly, with SIA shares tumbling as much as 8.6% at the open, before paring losses slightly to close midday down nearly 7%. The signal was clear—this was not business as usual volatility. It was a structural miss with capital reallocation consequences.

SIA’s 25.1% stake in Air India, initiated during the Vistara merger, has now emerged as a pronounced earnings liability. While SIA’s Singapore-based operations—especially the core passenger and cargo segments—continued to deliver operating profit amid lower fuel costs and a weaker US dollar, the performance was overshadowed by associate losses, largely attributed to Air India.

Crucially, the market had not priced in the scale of Air India’s financial drag. This is the first full quarter in which SIA consolidated its share of the Indian flag carrier’s earnings. And the timing could not be worse. Following the fatal crash of Air India Flight 171 in June, the airline faced not only reputational fallout but a sharp drop in bookings—reportedly down 20% across both domestic and international routes.

This decline was compounded by a deterioration in pricing power. Average fares fell 8% to 15%, according to estimates shared with CNBC. These twin shocks—volume contraction and yield erosion—made their way into SIA’s P&L through associate losses, dragging overall profitability despite stable fundamentals at home.

What this episode reveals is not simply a quarterly underperformance. It’s a warning about capital fragility in cross-border aviation stakes where the parent has little operational control but bears full financial exposure. SIA’s equity investment in Air India, once viewed as a strategic bridge into the subcontinent’s fast-growing travel market, now represents an open flank.

This is not a new theme. Southeast Asian carriers with partial stakes in foreign operators have repeatedly faced challenges converting ownership into operational influence. For SIA, the risk now is that Air India becomes an earnings drag for multiple quarters—precisely at a time when regional competition is intensifying and passenger yields are falling.

Passenger yields for SIA and Scoot declined by 2.9% during the quarter, as new entrants and returning incumbents continued to add capacity. Revenue per revenue passenger-kilometer fell to 10 cents, placing pressure on margin even as total passenger numbers hit a record 10.3 million.

This combination—record volume but declining yield—suggests market saturation risk. Airlines across Asia have ramped up flight frequencies, drawn by pent-up demand and lower fuel input costs. But as capacity continues to climb, pricing pressure becomes structural rather than cyclical. In that context, associate losses become less forgivable.

The Indian Directorate General of Civil Aviation (DGCA) has reportedly initiated a wider operational audit of Air India following the crash. Flight cuts, maintenance overhauls, and crew rotation scrutiny are all on the table. This adds another layer of uncertainty to SIA’s earnings visibility from the associate.

Moreover, regulatory tightening in India—be it through aviation safety enforcement or limits on international slot expansion—could constrain Air India’s recovery trajectory. For SIA, this implies longer capital lock-in and muted return potential on the 25.1% stake. Unlike a wholly-owned subsidiary, the levers to course-correct are both slower and more politically encumbered.

The SIA case underscores a structural lesson for sovereign-linked or regionally scaled carriers: associate earnings can magnify downside faster than they compound upside. Air India’s losses, made visible only after December 2024 when SIA began full consolidation, now pose visibility risk to both analysts and sovereign capital allocators tracking SIA’s dividend trajectory and long-term cash flow profile.

Analyst downgrades have followed. JP Morgan moved the stock to neutral with a $7 price target. CGS and Morgan Stanley both flagged near-term pressure but diverged on the longer-term stabilization outlook. That divergence itself reflects the opacity of SIA’s current exposure: the Singapore core is resilient, but the Indian associate story has become the dominant narrative.

This quarter’s miss is not an operational indictment of SIA’s Singapore business. It is a capital posture alarm. In high-volatility sectors like aviation, associate equity exposure—particularly in sovereign- or state-managed entities—requires more than financial commitment. It requires operational shield, risk ring-fencing, and earnings contingency planning.

Until Air India stabilizes, SIA’s quarterly outlook will remain vulnerable to incidents beyond its operational reach but fully within its financial consequence zone. This isn’t a passenger yield problem. It’s an exposure structure problem. And markets have just begun to price it in.