Asia's most successful hub carriers, Singapore Airlines and Cathay Pacific, are well positioned to weather present stormy conditions.

But they must continue to expand to remain relevant in an aviation market that will be dominated by new hubs and emerging long-haul competitors.

This is not a matter of choice.

In the short term, continued expansion amid an environment of weakening premium demand and high fuel costs will raise operational and financial pressures, but the long-term risks and rewards rule contraction out as an option.

Singapore Airlines (SIA) has had year-on-year passenger load factor reductions every month this year of 2008, the latest a 1.1 percentage point fall in July.

Capacity growth in 2008 has been strong for the airline, which had a further 8.2 per cent year-on-year expansion in July, and although great news for Changi Airport, airline yields must be suffering, as demand growth fails to keep up with capacity expansion.

At a time when economies are slowing and travel markets are softening, the delivery of new aircraft to SIA in recent months has resulted in extra frequencies to Europe, southwest Pacific, east Asia, the Americas, and west Asia and Africa.

According to SIA, replacing the Boeing 747-400s with the larger A380 aircraft on the London, Sydney and Tokyo routes has contributed to the capacity increase.

Meanwhile, Airport Authority Hong Kong reports passenger volume at Hong Kong International Airport rose just 1.3 per cent year on year in July to 4.5 million and cargo throughput rose 0.7 per cent to 317,000 tonnes.

Aircraft movements increased 2.1 per cent from July last year to 25,895.

Without Cathay Pacific's continued capacity expansion in July (passenger numbers up 9.7 per cent and cargo tonnage up 5 per cent), HKIA's traffic would have contracted in the month.

Despite the overall market slowdown, HKIA identified a "few bright spots", namely increased transfer traffic related to North American and Australasian destinations.

Cargo shipments, another key focus of Cathay's strategy, also helped overall cargo throughput growth to remain positive in July.

Here again, Cathay is pumping new capacity into the market as new orders arrive. But cargo imports and exports overall for the airport declined.

"Airports and airlines worldwide are feeling the effects of surging fuel prices and economic uncertainties -- conditions we expect will likely continue," AAHK chief executive Stanley Hui said.

"Airlines have started to reduce flight frequencies to contain losses."

He said that as a result the authority was anticipating a more difficult operating environment and slower growth for all categories of air traffic for the remainder of the year.

A key factor driving the build-up in capacity by SIA and Cathay is a defensive response to the fast-growing Middle East airlines and their hubs.

As a proportion of total fleet orders in the Boeing and Airbus order books, Middle East carriers account for 13 per cent.

But as a proportion of wide-body order books, an indicator of future international market dominance, Middle East carriers account for 25 per cent of the world's total, with 524 orders (led by Emirates, Etihad and Qatar Airways), against 763 orders for the entire Asia-Pacific region, significantly more than Europe and almost twice as much as North America.

Much is at stake here.

Cathay, SIA and their respective hubs can come out of the turbulent conditions stronger, capturing traffic from rival Asian hubs, whose flag carriers are shrinking by necessity in the present environment.

But the price of that potential gain is likely to be a sacrifice of profitability.

They and their hub airports are in a long-term fight with the Middle East hubs and their emerging mega-carriers.

None of the protagonists will be taking any prisoners.