How do #Asia’s legacy# airlines tackle growing competition from #LCCs?

While Europe’s debt crisis and global economic uncertainty are threatening airline profitability in the West, the Asian airlines are experiencing relatively strong growth.

According to forecasts from the International Air Transport Association (IATA), carriers based in Asia Pacific will make profits of $2.1 billion in 2012. That is 60 percent of the total profits of $3.5 billion predicted for the global airline industry.

However, there is actually mounting risk to the health of Asia’s airline sector from increased competition. One example would be Asia’s premium legacy carrier, Singapore Airlines, which surprising reported a January-March net loss of S$38.2 million ($30.58 million), a swing from a net profit of S$171 million a year ago.

A boom in low-cost travel and an increase in airline capacity in Asia last year have inevitably added pressure on passenger yields for premium carriers. Coupled with the weakening travel demand and soaring jet fuel prices, aviation analysts warned that the turbulence is unlikely to end any time soon.

Siva Govindasamy, Asia Managing Editor from Flightglobal told CNBC that premium legacy carriers face intense competition on many fronts, both in the low cost market segment and full service segment due to high costs involved.

The airline, 56 percent owned by Singapore’s sovereign investor Temasek Holdings, responded by asking its pilots to volunteer for a no-pay-leave of up to two years to save costs and cut its cargo capacity by 20 percent due to persistent weakness in demand. It has also launched its own budget carrier, called Scoot, to tackle the low-cost challenge.

“The challenge for Singapore Airlines is how do we stave off these guys and retain a premium level where they can charge a higher price,” Govindasamy said.

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