'Running an airline is never an easy business': Ho Ching defends Temasek's Air India investment

The airline industry is a difficult business to succeed in, and Ho Ching, chairman of Temasek Trust, has come out in support of Singapore Airlines' (SIA) investment in Air India.

Ho, the former CEO of Temasek Holdings, made a lengthy Facebook post on Wednesday (Sept 2) weighing in on recent discussions surrounding Air India's record loss of US$2.33 billion (S$2.97 billion) and request for $1.9 billion in fresh equity from shareholders Tata Sons and SIA.

In her post, Ho shared about Air India's history, from its origins as Tata Air Services in 1932, where it "quickly established a well-earned reputation as a premium service airline".

SIA had not been established yet at the time, and Tata Air Services had been considered an airline with "excellent service standards", she said. 

Ho continued to explain Tata Air's transition into Air India when it became a public limited company, and how the Indian government subsequently became a majority stakeholder in the airline "to give it more financial heft to develop its international network".

Air India was subject to further changes due to the Indian government's laws, which forced it to merge with other India-registered airlines.

Ho also said that constant disagreements between then-chairman JRD Tata and government stakeholders led to issues within the airline.

"Air India service standards and financial stability went downhill since (JRD's departure as chairman)," Ho said, adding that the many attempts by JRD's successor, Ratan Tata, to recover the airline were futile.

Ho said: "Running an airline is never an easy business because it is a heavily regulated business that is not purely market driven."

She also compared Air India to SIA, emphasising that SIA is "clear minded and clear headed", and established itself without "handouts" from the Government.

Foreign airlines make up about half the market share in Singapore, Ho said, unlike other countries where national carriers often take up 70 to 80 per cent of the national market.

SIA "must constantly innovate and offer better products and services to maintain or grow their market share in Singapore against the best of competition that other international operators can offer," Ho said in conclusion.

'No one owes Air India a living': WP's Kenneth Tiong 

Workers' Party (WP) member and MP for Aljunied GRC, Kenneth Tiong, also weighed in on the topic, opposing Temasek's investment in Air India.

"I will not support, nor expect, any future use of Temasek's funds to prop up Air India via SIA. If SIA wants to continue its bet on Air India, it should do so on its own two feet, and not on Temasek's," he said in a Facebook post on Aug 26.

SIA owns about 25 per cent of Air India, and Temasek in turn owns most of the Singapore carrier, "so this is not only a question for private shareholders", Tiong said. 

"No one, least of all Singaporeans, owes Air India a living," he added, also saying that he has filed a parliamentary question for the upcoming session on Sept 8, asking the Minister for Transport whether these losses have been assessed against SIA's capacity to provide essential transport services. 

Meanwhile, Juliet Teo, joint head of portfolio development at Temasek Singapore, said Temasek viewed Singapore Airlines' decision to invest in Air India from a long-term perspective and was supportive of it.

"We recognise that the large-scale transformation of Air India involves complex, multi-year operational and integration challenges," said Teo in a letter to the Business Times on Aug 29.

Teo said that "efforts of this scale take time and are not expected to be linear", and that Temasek supports "strategic moves by our portfolio companies that position them for long-term growth and global competitiveness".

[[nid:743878]]

dana.leong@asiaone.com