Centre for Asia Pacific Aviation notes Singapore Airlines posted a strong quarterly increase in net profit, helped by record revenues, which rose 6.7% in the three months ended 31-Dec-06.

According to SIA, demand for air travel grew on the back of 'benign conditions in the major economies'. But if the one-off gains from the sale of its share in Singapore Aircraft Leasing Enterprise are excluded, SIA's net earnings would have fallen 1.4%, due to higher fuel and staff costs, as well as sluggish performances by SATS and Virgin Atlantic (the latter due to changes in international accounting standards).

Malaysia Airlines (MAS) meanwhile expects to post its second consecutive quarterly profit in the Dec-06 quarter, as the benefits of its turnaround plan, including staff cuts and network rationalistion, flow to the bottom line.

"But both carriers face an increasingly volatile outlook," stated the Centre's Executive Chairman, Peter Harbison.

SIA forecasts 'continued strength in demand', but predicts revenue growth will be constrained by the shortfall in capacity from the A380 delays. IATA paints an industry-wide picture of pressure on revenue growth in 2007. MAS has also expressed concerns about the potential ing of the lucrative Kuala Lumpur-Singapore route to LCCs.

"A phased introduction of fresh competition is the most likely outcome of upcoming bilateral negotiations, but indications are that the route could be at least partially ed up by the end of this year," according to Mr Harbison.