SINGAPORE --  Singapore Airlines, one of Asia' s top airlines in terms of market capitalization, faces multiple challenges. Budget airlines have crowded Asia' s skies, and pressure is mounting in the luxury class segment because of ambitious Middle Eastern airlines.

    Net profit for the July-September quarter slumped 43% from a year earlier, to 90.9 million Singapore dollars ($70 million). With marginal growth in revenue, lower fuel costs pushed up operating profit by 51%. The company' s bottom line was weak because of the faltering performance of affiliate budget carrier Tiger Airways Holdings (Tigerair), which logged a loss of S$182.3 million for the quarter.

      Southeast Asia has a glut of budget airlines. Due to the cutthroat competition, Tigerair has recorded losses for three fiscal years in a row. Its major rival, AirAsia of Malaysia, recorded a 54% drop in net profit in 2013.

      Tigerair this year had to shut down or sell off overseas ventures in the Philippines and Indonesia to curb its losses. And in October, the airline announced it is planning to sell its remaining 40% stake in its Australian operations for 1 Australian dollar ($0.86) to Virgin Australia. Since 2013, Virgin has owned 60% of Tigerair' s Australian operation.

      Facing an imminent need to rescue Tigerair' s remaining Singapore operations, its parent is stepping in. Singapore Airlines announced in October that it will convert its nonvoting Tigerair securities into shares to increase its stake in the budget carrier from 40% to 55%. The parent will also participate in Tigerair' s S$234 million rights issue, committing to invest up to $140 million. The top-tier carrier' s equity stake in Tigerair could be a maximum of 71%.

      " Tiger is an integral part of Singapore Airlines' portfolio," CEO Goh Choon Phong said in early November when announcing quarterly results. He stressed that Tigerair gives its parent room to grow in the budget airline space.

New rivals

Singapore Airlines' core business also faces headwinds. Emirates and Etihad Airways, both of the United Arab Emirates, and Qatar  Airways have established modern fleets, as well as luxurious facilities and services. Many business- and first-class passengers now prefer to fly with the Middle Eastern airlines. These carriers are boosting services on Asia-Europe routes, where Singapore Airlines has traditionally been strong, taking advantage of their locations.

      With the competition, demand for flights to and from Europe remains weak. Singapore Airlines' seat capacity utilization in October was down by 3.5% from a year earlier. The airline said in a statement that it may consider trimming capacity to fit demand.

      The airline is looking at other initiatives as well.

      Together with Tata Sons, the investment holding company of the Indian conglomerate Tata Group, Singapore Airlines is launching a new standard carrier based in New Delhi, called Vistara. Although the airline has had to push back its debut due to red tape in India, Singapore Airlines remains optimistic. " It is about going beyond the Singapore hub," Goh told reporters. " It is hard to argue against India as a high potential [market]."

      Singapore Airlines in November increased its investment in Virgin Australia Holdings to 22.8%. The two airlines have partnered on code-sharing flights and marketing since 2011. It intends to enhance the partnership to close the gap on Australian flag carrier Qantas. Singapore Airlines also announced a nonequity alliance with Air New Zealand in September. The two will start code-sharing flights in January 2015.

      " We are fortunate to be in a position [where] we have a strong balance sheet," Goh said. " We can use this strength to invest for the future."

      Early next year, Singapore Airlines will launch a premium economy class service, a step it has contemplated for years, for medium- and long-haul routes. The aim is to further differentiate itself from budget carriers by catering to passengers willing to pay more for better service. For business class and first class, it is spending $325 million upgrading the cabins in its new Boeing aircraft. It will offer some of the widest   seats in the industry.

      Despite the difficulties, investors continue to value the airline' s position in Asia. With lower oil prices pushing down fuel costs, the stock price has rebounded in the past month.