SIA, regularly ranked among the world's top airlines, said its airline operations hovered just above the break-even point for the first half of its 1998-99 financial year.

The national carrier said its net profit for the six months ended September 30, 1998 fell 24 per cent to Singapore $468.3 million (US$289 million) against $615.9 million last year while on the company side, operating profit after deducting tax and extraordinaries fell 26.5 per cent to $399.5 million.

"My personal view is that the fall in (group) operating profit, even though it's quite dramatic, was a fall from a high base," said Nua We Boon, an aviation analyst with Fraser Securities.

"The first half of last year was really good with a 24-per cent increase," he added.

Nua has projected SIA's 1998-99 full year net profit to fall by about 25 per cent to $783 million.

Lim BengEu of Vickers Ballas in Singapore said the trend was "definitely down for the airline's core business," and he added that when factors such as sale of aircraft, contributions from subsidiaries and associates were deducted, SIA's operating profit was down as much as 40 per cent.

But despite this, Lim said the airline was expected to make a profit in the second half, although "not the same magnitude as the first half."

Compared with other faltering regional carriers, SIA's results look robust but analysts said the carrier was more fairly measured against global competition.

"You have to compare it with other global airlines and if you do, then the performance looks quite bad," said one analyst.

Fears the airline was flying into turbulent skies were raised by SIA chief executive officer Cheong Choong Kong when he launched an across-the-board multi-million dollar makeover for all classes of travel on SIA planes in September.

"Times are bad and the airline's profits are going to decline appreciably,"Cheong said, adding that the carrier was taking "tactical measures" to reduce damage from the Asian crisis.

He said these included deferring the delivery of aircraft, redeploying capacity for the more buoyant U.S. and European routes and accepting lower levels of expansion.

Cheong was speaking after launching the $500 million facelift for all SIA's cabin classes, which includes wood-panelled writing desks, spacious first class seats that recline 180 degrees and free flow of champagne in economy.

Asked why the carrier was spending so much on refurbishing when Asia was mired in crisis, Cheong said the launch was part of SIA's long-term commitment to customer service.

But for the short-term, the spectre of operating profits possibly sliding into the red was raised when the airline said that its passenger and cargo load factors were down.

SIA said its overall load factor, which measures how efficiently it uses passenger and cargo capacity, fell 2.5 percentage points to 67.9 per cent compared with thecorresponding six months in the previous financial year.

The airline's break-even load factor, meanwhile, rose 2.7 percentage points to 66.7 per cent.

"As things stand, SIA's load factor is just 1.2 percentage points above the break-even level. If demand falters on some routes, or a price war leads to further cutting of fares, SIA could see its operations sliding into the red," a Business Times report said.

But looking ahead, analysts said the Singapore carrier remained a solid company with its strong balance sheet and massive reserves of around $1.5 billion to $2 billion.

And despite its fall in earnings, SIA, one of the few carriers in Asia with a war chest to mount purchases of stakes in other Asian airlines, is still on the acquisitions trail.

Cheong said at the September launch that the airline was interested in airlines in Thailand, South Africa, Taiwan and "other places". An SIA spokesman said last week that SIA may take up to a 25-per cent stake in Taiwan's China Airlines.