Take, for example, Singapore Airlines, one of Asia's most profitable companies. In the year ending March, 2001 the company reported net profits of S$1.55 billion (US$885 million), a rise of 35 percent compared with the previous year. It's the world's second-biggest airline stock in terms of market capitalization and also very liquid, which makes it, by definition, an institutional favourite.

By September 17, SIA shares had fallen by nearly 20 percent from their levels of the previous week, to trade at around S$8.20, its lowest level in three years. What's more, the falls came amid analysts' warnings of further losses. "It's being clobbered from all sides," says Alan Greene, a credit analyst who tracks the transport sector at Barclays Capital in Singapore.

It seems to have been just one thing after another for SIA. Last year, the airline suffered a major fatal accident in Taiwan. Meanwhile, the city-state's slowing economic growth had already seen load factors declining. Load factor measures how efficiently an airline uses passenger and cargo capacity. Passenger loads had already been dropping for seven straight months to August while slowing exports--especially IT-related shipments which are transported by air--manifested themselves in a year of continuous decline for cargo. Fear of flying, especially to the US, a key SIA destination, will exacerbate the decline.

Like every other airline, SIA's falling revenues will also be compounded by higher jet-fuel prices, as oil prices are expected to remain high consequent to any U.S. military action in the Middle East. Fuel accounts for 17 percent - 20 percent of the airline's total costs.

Then, there have been the airline's investments. In 1999, SIA paid a whopping S$1.6 billion for a 49 percent stake in Britain's Virgin Atlantic Airways. Analysts said at the time that SIA had paid too much. But SIA had been eyeing Virgin's routes to the United States--the very routes which are likely to be hardest hit in the wake of the disasters of September 11.

Meanwhile, Air New Zealand--in which SIA holds a 25 percent stake--is in dire straits. It posted a loss of NZ$1.43 billion ($602 million) for the year ending June 2001, after writing down to zero its NZ$1.3 billion investment in Ansett Australia, which had mainly plied Australia's domestic routes and was expanding overseas until it stopped flying on September 14.

Now Australia's regulators are demanding that Air New Zealand cough up A$400 million (US$205 million) in pension and other settlements for Ansett employees, putting a New Zealand government NZ$850 million rescue plan for Air New Zealand in danger. SIA has agreed to participate in a rescue bid which would involve taking a stake of up to 35% in Air New Zealand. If Air New Zealand goes under, however, SIA will have to write off NZ$465 million, the amount it paid for its 25 percent stake in the airline in the first place.

Still, SIA has a cash hoard of more than S$1.4 billion, with no debts, so it will be in a position to pick up stakes in troubled airlines at a time of looming opportunity. Most analysts say it is already undervalued and rate it as a buy.