Troubles have become evident at two Southeast Asian national airlines, Thai Airways International and Singapore Airlines (SIA), according to reports by securities analysts.

While fluctuating oil prices remain a major risk factor for THAI, Seamico Securities has said in a report that the Thai national carrier may also have to consider human-resource expenses, which have shown a sharp increase in the fourth quarter of the 2006 fiscal year.

In the July-September period, THAI posted a 33-per-cent increase in net profit. But this was attributed to foreign-exchange gains and aircraft sales.

"Excluding these two items, worth Bt7 billion, normalised profit in the fiscal year dropped 38 per cent year on year to Bt3.6 billion. This was due to a rise in operating expenses from energy (up 7 per cent) and human resources (up 30 per cent), which offset a 10-per-cent rise in operating revenues," Seamico said.

THAI's forex gain for the fiscal year totalled Bt2 billion.

Potential oil-price increases are the main factor affecting THAI's earnings, even though it has continued to raise its fuel surcharge, which partially offsets the problem.

"We expect the share price to continue fluctuating in response to oil prices," said Seamico, which recommended investors unload THAI stock if the price exceeds Bt48.

On Friday, the THAI share price closed at Bt45.75.

Meanwhile, Singapore Airlines has serious balancing problems to address after operating statistics for October showed strong passenger traffic growth but abysmal cargo demand, said securities firm UOB Kay Hian.

The analyst said that as a result of falling cargo traffic, SIA is probably experiencing weakening cargo yields. Passenger yields should help offset this, but they would need to overcome the airline's reduced fuel surcharges.

Cargo operations were in the red for the first quarter of Singapore's 2007 fiscal year, which began in April, when a 5 million Singapore dollar (Bt116 million) loss was recorded. This grew to S$31 million in the second quarter, when yields improved 1.5 per cent but unit costs rose by 3 per cent, raising the break-even load factor to 65.2 per cent.

In October, traffic fell 2.7 per cent year on year and capacity expanded 6.2 per cent resulting in a cargo load factor of 62.4 per cent.

"SIA attributed much of the fall in cargo traffic to the Deepavali-Hari Raya holiday in India and the Middle East, but it had no impact last year when the holiday ended on November 1. Also, traffic growth averaged only 2.4 per cent year on year in the previous five months, much-assisted by a one-month recovery of 5.9-per-cent growth in September. So cargo demand was definitely just plain weak," said UOB Kay Hian.

Passenger traffic increased 8 per cent compared to capacity growth of just 3.7 per cent, raising Singapore Airline's passenger load factor to 77.9 per cent.

UOB Kay Hian said SIA's balancing act would necessitate the off-loading of two freighters that were returned from lease at the end of September and reportedly added to capacity.

Passenger capacity must continue to support strong passenger growth, but cargo cannot sustain the continued addition of belly-hold cargo capacity if SIA does not reduce freighter capacity, said the securities firm.

"Cargo is a long way from achieving SIA management's commitment to recover both profitability and first-half losses by the end of the current year. The stock accelerated on the back of falling fuel prices, assisted by speculation about the potential value of a possible sale of SALE, the aircraft leasing enterprise. With these cargo developments, it will be clear that the price overshot. Anticipation of still-lower crude and fuel prices could be fulfilled eventually, but the damage to profitability from cargo performance will be the dominant focus," UOB Kay Hian said.