Singapore Airlines, the world's biggest airline by market value, said on August 1 that quarterly net profit fell 26 percent in the absence of one-off gains, and that the high price of jet fuel remained its biggest headache.

Singapore Airlines said 37 percent of its total expenses for the three months to the end of June had been for jet fuel, nearly twice as much as it spent on its pilots, flight attendants and ground staff.

"Fuel remains a significant challenge, with price volatility continuing to be a key variable to financial performance," the state-controlled firm said in its first-quarter results report.

Net profit for the quarter fell to S$424 million (HK$2.19 billion) from S$575 million in the previous year when the result was helped by a one- off gain of S$223 million from the sale of property.

First-quarter revenue rose 6 percent to S$3.62 billion, while costs rose marginally to S$3.16 billion from S$3.15 billion. Jet fuel expenses eased 4.7 percent to S$1.17 billion - net of hedging in the futures market.

After warning investors in May that it faced limited capacity growth because of the delayed delivery of the Airbus A380 superjumbo - due to arrive in October - Singapore Airlines said yesterday that capacity growth would resume later this fiscal year to the end of March 2008 as it takes delivery of four Boeing B777-300ER and three A380 aircraft.

It expects passenger capacity to rise by 1 percent in its 2007/08 fiscal year.

Singapore Airlines, which flies 93 aircraft, will be the first to fly the A380 commercially and expects to use the giant aircraft on its busy London-Singapore-Sydney route.

Singapore Airlines' shares have risen around 9 percent so far this year, beating Cathay Pacific Airways' 7 percent rise but lagging an 11 percent increase in shares in Qantas Airways.

The price of jet fuel, the single-biggest cost item for airlines, has climbed a fifth but is still 6 percent below a record high of US$93.20 (HK$726.96) a barrel set in August 2006.

The carrier is in talks, so far lasting a year, to buy a stake in loss-making China Eastern Airlines, the smallest of China's three main carriers.

Majority-owned by state investment firm Temasek and valued at US$16 billion, Singapore Airlines is the cheapest stock among leading Asian carriers, trading at nearly 14 times forecast earnings against multiples of 14.8 for Cathay Pacific and 15.4 for Qantas.