Singapore Airlines is Asia's most profitable airline, but its lack of success in seizing new routes is exposing it to growing competition in the region, where carriers from India to China are expanding.

The lack of a clear growth strategy as Singapore Airlines awaits a deal in China, coupled with an expected slowdown in global travel, has led analysts to cut profit forecasts for the carrier.

Singapore Airlines, in which the Singaporean government investment firm owns 55 percent, lost a bid last month for a stake in China Eastern after it was effectively blocked by the mainland carrier's bigger rival, Air China.

But most analysts expect Singapore Airlines to make a second bid or turn to smaller regional carriers, which could be less sensitive targets.

"China will be a major driver in business and premium traffic, so it's crucial," said Raymond Yap, an analyst at CIMB-GK.

Singapore Airlines and Temasek's $920 million bid for 24 percent of China Eastern initially received the blessing of the Chinese government but was voted down in January after objections from some China Eastern shareholders and a counteroffer by Air China.

Analysts had expected the China Eastern stake to lift Singapore Airline's earnings by 5 percent in the first year, but the greater benefit would be wider access to China's rapidly growing domestic market.

Singapore Airlines, which serves five Chinese cities, including Beijing, Shanghai and Hong Kong, could gain access to China Eastern's 105 international and 308 domestic routes through future joint operations beyond China Eastern's hub in Shanghai.

While global travel demand is expected to be dampened by a US recession, China is forecast to be Asia's fastest-growing aviation market, with double-digit growth up to 2011.

"What they do next depends very much on the vibe they get from the Chinese, especially after the difficulty with China Eastern," said Shukor Yusof, an analyst with Standard & Poor's.

Singapore Airlines said it remained interested in China Eastern but said the next step was up to the mainland carrier.

"China is a very important market for Singapore Airlines," said Stephen Forshaw, a spokesman for the carrier. "The price offered is the maximum justified by the business fundamentals."

Paul Dewberry, an analyst with Merrill Lynch, said Singapore Airlines could offer sweeteners to China Eastern's shareholders, like a special dividend.

Others said Singapore Airlines should look at smaller regional carriers.

"Shanghai Airlines is a viable alternative, which would be much easier to integrate," said Andrew Au, an analyst with Cazenove.

Corrine Png, a Citigroup analyst who recommends that investors sell shares of Singapore Airlines, cited its lower growth prospects compared to rivals like Cathay Pacific and Air China.

"M&A opportunities are relatively limited given regulatory constraints and the lack of attractive investment targets," she said.

But Singapore Airlines could look to other avenues for growth if its China plans stall, through a partly owned low-cost carrier, Tiger Airways, for example, or by bidding for Toll Holdings' 62 percent stake in Virgin Blue, Australia's No. 2 carrier, after Qantas.

Virgin Blue is seen as the main beneficiary of an "open skies" deal being negotiated between the United States and Australia, which could open the prized US-Australia route to competition.

Singapore Airlines could also open new passenger and cargo routes in Europe and North America because of agreements signed by the Singapore government.

"Each of these deals could open up new network opportunities, so Singapore Airlines still has growth prospects," said Yusof, the Standard & Poor's analyst.

An agreement with Britain will take effect from the end of March, but it is not likely to add services in the short term because of problems in getting British landing and takeoff rights, especially at London Heathrow Airport, which is highly congested.

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