The combination of the deadly Sars virus and the war on Iraq has caused Singapore Airlines to report its first ever quarterly loss.
Singapore Airlines staff face pay and job cuts
The airlines, which is 56% owned by the government, was previously one of the most profitable airlines in Asia.
The airline posted a loss of S$312m ($177.5m, £110.9m) in the three months to June, compared to a profit of S$478 in the same three months a year earlier.
"While it appears the worst is over, the outlook for the next quarter and the rest of the year is still uncertain," the group warned.
The firm also cautioned about its recent marketing promotions, saying that more passengers would only come through lower-priced tickets.
"Volume has recovered by the yields are still low," Vickers Ballast Investment Research airline analyst Timothy Wong
At the height of the Sars outbreak in April and May, the airline was losing S$6m a day as air passenger numbers in Asia halved.
The slump saw the firm implement the biggest round of job cuts it has seen in its 56-year history, with 414 staff laid off.
Wages were also slashed and the number of flights reduced in a bid to trim costs.
Last week, it announced the positions of a further 156 cabin crew and 26 pilots would be axed.
Overall, the airline reported that revenue was 35% lower and passenger numbers 49% down during the April to June period.
But the group revealed it expected to restore flights over the next three months, although capacity would remain lower than a year ago.