SOFTER operating figures in October for Singapore Airlines (SIA) seem to hint that the financial third quarter ending Dec 31, 2016, could miss expectations, following a disappointing second quarter.

Some analysts have flagged that the numbers don' t bode well for the third quarter, even though the three- month period is typically boosted by the year-end holidays.

" Q3 is traditionally peak period and the street expects earnings to improve in 2HFY17," said UOB Kay Hian analysts K Ajith and Sophie Leong in a report, suggesting an entry price of S$8.90 for the stock and a target price of S$10.10. " The weak October numbers do not add to confidence."

The strengthening of the greenback against the Singapore dollar in recent weeks will also translate to higher expenditure and could negatively affect the balance sheet, they added.

In October, passenger load factor (PLF) fell for SIA, regional wing SilkAir as well as the group' s two budget carriers, Scoot and Tigerair.

At the parent airline, passenger traffic in October slid 3.1 per cent against a 1.1 per cent scale-back in capacity this resulted in a PLF of 77.4 per cent, a fall of 1.6 percentage points, as PLF declined across all regions due to softer demand. Meanwhile, medium/long haul budget arm Scoot' s PLF slumped as much as 10.1 percentage points to 75.1 per cent.

SIA Cargo was the only to report an increase in load factor, which edged up 1.2 percentage points to 66.2 per cent, as demand outstripped the capacity injection. However, analysts reckon this could be due to yields being sacrificed to bolster loads.

While the recent expansion of SIA' s partnership with Lufthansa might help, the weak yield environment will persist on the back of overcapacity, said OCBC Investment Research analysts Eugene Chua and Jodie Foo, who have a fair value of S$10.22 on the counter.

Aggressive expansion by both the Gulf and Chinese carriers are forcing yields downwards, while a slowing economic environment could spell bad news for premium traffic.

Similarly, DBS Group Research analyst Paul Yong expects SIA' s operating earnings to be " sluggish" over the next few quarters, weighed down by weak demand and non-fuel cost pressures.

Of course, it is worth noting that SIA isn' t the only one struggling with headwinds. Hong Kong' s Cathay Pacific, which reported an 82 per cent nosedive in profits for the first six months of the year, has issued a profit warning for the second half of the year. It pointed the finger at overcapacity and stiff competition.

Meanwhile, Australia' s Qantas has warned that profits for the six months ended Dec 31, 2016, could fall year on year.

In fact, JP Morgan analysts expect SIA to hold up better than Cathay Pacific, given SIA' s lower fuel hedges and the fact that its focus on South-east Asia and Australia leaves it relatively less affected by the Chinese carriers.

Nonetheless, shares in SIA have eased from S$10.11 since it released its Q2 results on Nov 3. On Tuesday, the stock closed two cents lower at S$9.60.

Its Q2 results appeared to have caught the market off-guard, as profits plunged nearly 70 per cent year on year to S$64.9 million, while revenue was 5 per cent lower at S$3.65 billion.

While the drop in oil prices has been helping to bolster the bottom line for previous quarters - especially as fuel hedges progressively unwind - the double whammy of a drop in revenue and higher non-fuel costs in Q2 proved tough to stave off. And with the competitive headwinds clearly likely to persist, investors may need to steel themselves for the possibility of another challenging quarter ahead.