Singapore Airlines announced a 36 per cent fall in profits yesterday and British Airways is expected to reveal a reduction of up to 90 per cent today as the economic downturn hits passenger numbers.

Singapore Airlines, the world's most valuable carrier, said that its profits in the three months to September 30 had fallen to S$324 million (£137 million).

The airline, which owns 49 per cent of Virgin Atlantic, also gave warning that advance passenger bookings for the new year were weak.

Meanwhile, BA is due to report its financial results for the six months to September 30. Analysts believe the combination of record high fuel prices during the summer and falling consumer demand will devastate profits.

Evolution Securities has estimated that the British flag carrier will report revenues slightly up on last year at £4.6 billion, but earnings before tax will fall 78 per cent to £124 million.

Dresdner Kleinwort is more pessimistic, forecasting that BA's earnings before tax will fall 89 per cent to £63 million. The average fall predicted by City analysts is 84 per cent.

Dresdner analysts said: “British Airways' [first-half] results are likely to see a substantial decline from the record profits reported last year. We see downside risk to the full-year revenue guidance, and the October traffic statistics reported concurrently are likely to be grizzly.”

BA has yet to issue any formal guidance for the carrier's likely profitability for this year. Singapore, which is valued at more than £6 billion, said yesterday that passenger numbers had fallen because of the global economic slowdown, which had cut corporate and leisure travel. The airline has responded by reducing flights to destinations in Asia.

BA is expected to be hit harder than Singapore by the economic slowdown because it has greater exposure to the North American and European markets, where the turmoil has been greatest. BA has responded to the difficult environment by pledging to cut the number of flights it operates this winter. It is also cutting costs and hundreds of managers are expected to be given redundancy.

An aviation source said: “We are being flooded with CVs from BA people who need to get out.”

Ashley Steel, head of transport and infrastructure at KPMG, said: “All airlines, whether traditional flag carriers or low-cost airlines, face a long winter ahead. This is creating a ‘challenge beyond all challenges' for an industry already struggling with rising oil prices and now a falling pound.

“Traditional flag carriers must now move closer to the low-cost model and do so rapidly. Capacity cuts, cost cutting and cash management must be the new mantra. Despite this [action], many carriers will still be in trouble and swift and efficient consolidation may be the only way out for some.”

BA's share price has fallen 62 per cent in the past year. It closed down 17p at 130p yesterday.

Singapore Airlines, which is 55 percent-owned by Temasek, Singapore's sovereign wealth fund, has seen its share price fall by 29 per cent since the start of this year. Cathay Pacific has fallen by 54 per cent and Qantas by 47 per cent.

Despite the gloom over falling passenger numbers, airlines have benefited from a steep drop in the price of oil. Oil hit a peak of $147 a barrel in July but is now $61, which will cut overheads in the coming months as the airlines' hedging strategies unwind.

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