By Jason Szep TOKYO, Dec 21 (Reuters) - Flying to Bali from Tokyo on New Year's Eve costs at least $1,290. That's for an economy seat in one of Asia's cheapest airlines, Garuda. Wait another week, and the price tumbles to $375. The peak holiday season gives airlines a chance to claw back some losses after September 11 turned a bad year into a horrific one. But once they're over, most major Asian carriers will face a grisly first quarter with many logging losses. After that, however, the ride gets a little smoother. Travel within Asia is not as bad as in Europe and the United States, and by summer the bigger carriers such as Singapore Airlines, Cathay Pacific and Qantas could feel some improvement as steep capacity cuts and low fuel costs begin to pay off. "The decline relative to their overall network hasn't been as severe as for the other regions," said Philip Wickham, analyst at ING Barings in Hong Kong. But it's been a nightmare of a year, with typically lucrative first and business class cabins hollowed out, passenger and cargo volumes dwindling each month and long-haul routes to the United States and Europe haemorrhaging severe losses. The $375 fare on Garuda from Tokyo to Bali in early January would barely be enough for Indonesia's flag carrier to pay its fuel costs. "They are simply keeping the route alive," said John Koldowksi, an official at the Pacific Asia Travel Association. Making matters worse, the fear of flying and global economic chill that followed the attacks on Washington and New York in September came in a year that was already seeing cargo traffic slipping across Asia. For most airlines, it's not as bad as Asia's 1997-98 financial crisis which sent some to the brink of bankruptcy, and analysts say the long-term outlook in the Asian aviation market, the world's fastest growing, helps dispel some of the gloom. In China, airlines are adding capacity in a booming domestic market. In Southeast Asia, Thai Airlines (THAI) and Malaysian Air (MASM) are heavily focused on intra-Asia routes, with less exposure to the money-losing U.S. and European routes. Shares in many carriers have started to reflect the glimmer of a mid-2002 rebound. Singapore Airlines (SIA) (SIAL), Cathay Pacific Airways Ltd (0293), Qantas Airways Ltd (QAN) and Korean Air Lines Co Ltd (03490) all posted sturdy gains in October and November, linked also to low fuel prices and hopes for a turnaround. But analysts say the pace of any recovery still depends on the speed of an economic turnaround in the United States, and how fast this trickles into the Asian economies. "It doesn't really matter which of those three airlines you look at," said Kevin O'Connor, analyst at Deutsche Bank, referring to SIA, Cathay or Qantas. "Making money in the March quarter of next year is going to be pretty much impossible." WINDS OF CHANGE IN CHINA Chinese airlines have low international exposure compared with other Asian carriers as they are focused on the growing domestic market, where still-strong economic growth and WTO membership are expected to fuel traffic demand. Analysts expect domestic traffic volume to grow about 10 percent in 2002, helped by increased trade during China's first year in the World Trade Organisation, making China one of the fastest-growing aviation markets in the world. The three biggest players, flag carrier Air China, China Southern (1055)(ZNH), the country's largest airline, and China Eastern (0670)(CEA)(600115) operate most of the country's international flights. "We need to count on the huge domestic market potential and sieze the opportunity of China's WTO entry," China Eastern's general manager Li Shaoyong told a business forum this month. Next year, the big three carriers will also be focusing on carrying out a government-directed merger with smaller Chinese airlines -- taking over their fleets and consolidating routes while restructuring their debts. Australia's Qantas, which recently ordered 15 new Boeing planes in a A$1.5 billion ($757.6 million) upgrade, looks set to remain one of the strongest in the region, dominating around 85 percent of Australia's A$10 billion domestic market following the demise of second-ranked Ansett Australia. But a sharp drop in international traffic, which has forced Qantas to cut routes and redirect planes to busier domestic routes, is likely to remain a drag on its performance in 2002. Singapore Airlines Ltd, among the world's most capitalised airlines and renowned for its modern fleet, high level of service and penchant for expansion, suffered its biggest drop in passenger loads in October since January 1996. Passenger numbers in October dwindled 14.6 percent from a year earlier, while freight slipped 7.8 percent. After an 88 percent slide in first-half net profit, it warned that the full brunt of the fallout from the U.S. attacks would be felt in the six months to March, a period which includes the typically lucrative Chinese New Year holidays in February. Still, analysts generally see SIA as healthy, and suggest it could even grab market share from weaker rivals during the crisis. "When I look at the period ahead, I do think that we've seen the worst in terms of traffic contraction in October, and from now on things will get better on the demand side," said Masya Spek, analyst at GK Goh in Singapore. "But profitability is going to come under some pressure, just because there's going to be more planes delivered and not so much of an increase in demand for travel," she said. Taiwan has big exposure to the U.S. market, and this means deep slides in passenger traffic on its key trans-Pacific routes to the United States, leading to cuts in capacity. Yields, however, have held up well thanks mostly to a weak Taiwan dollar. Hong Kong's Cathay Pacific Airways, Asia's fourth-largest airline by capacity, has said its current financial year is shaping up worse than 1998, when a regional financial crisis sunk it into its first-ever loss. It is reported to have told analysts to expect a second-half loss but a full-year profit. Many analysts, however, expect Cathay to suffer a full-year loss. TOUGH JAPANESE MARKET In north Asia, Japan's airlines are forecasting heavy losses for the current business year to March, with the nation's largest carrier, Japan Airlines Co Ltd (9201), forecasting a 40 billion yen ($311 million) plunge into the red, which would be its worst full-year net result since 1996/97. Number-two All Nippon Airways Co Ltd (9202) has forecast a net loss of 11 billion yen and third-ranked Japan Air System Co Ltd (JAS) (9203) has cut its full-year net profit forecast by 77 percent to 700 million yen from three billion yen. Even worse, some analysts are predicting another year of losses in 2002/03, with the airlines admitting that the situation still remains too unclear to predict when air traffic will begin to pick up. Korean Air, also hit by big exposure to the trans-Pacific, is pinning its hopes on the 2002 World Cup to be co-hosted by Japan next year and expects the event to help swell revenue by 100 billion won ($77.91 million) next year. South Asian airlines, such as Indian Airlines, generally have more exposure to the European market, with about 40 percent of arrivals in 2000 coming from Europe, according to the Pacific Asia Travel Association. As such, all three major Indian airlines are expecting losses for the year to March. The number of tourists who arrived in India in October plunged 29 percent, to 161,378 from 226,531 a year earlier, according to government figures. (With contributions from Tiffany Wu in Shanghai, Park Sung-woo in Seoul and Sophie Hares in Sydney) ($1=128.80 yen and 1.980 Australian dollars) ©2001 Reuters Limited.