UPDATE 1-Malaysia's AirAsia posts 43 pct rise in Q2 profit

* AirAsia Q2 net profit 198.9 mln rgt vs 139.2 mln yr-ago

* H2 passenger demand remains positive

* Shares down 1.75 pct ahead of results

(Adds details, quote, background)

By Neha Singh

KUALA LUMPUR, Aug 18 (Reuters) - Malaysian budget carrier AirAsia (AIRA.KL) reported a 43 percent rise in quarterly profit driven by a growth in passenger volumes and average fares.

The company saw a 11 percent growth in passenger volumes and an average fare that was 8 percent higher at 173 ringgit compared with 160 ringgit in the year-ago quarter.

AirAsia, Asia's biggest budget carrier by fleet size, said load factor, or the percentage of seats filled, rose 2 percentage points to 77 percent in the quarter.

"Load factors achieved in the month of July were in line with the prior year, while there have been significant improvements in yield," AirAsia said in a statement.

The airline posted a net profit of 198.9 million Malaysian ringgit in April-June compared with a profit of 139.2 million ringgit in the year-ago period.

The budget carrier, which competes with Jetstar Asia Airways and Tiger Airways (TAHL.SI) in the region, said the underlying passenger demand in the third and fourth quarters for the Malaysian, Thai and Indonesian operations remains positive, based on the current forward booking trend. The average forecast of 23 analysts tracked by Thomson Reuters I/B/E/S put AirAsia's full year net profit at 554 million ringgit before the results were announced.

On Monday, Malaysia's national carrier Malaysian Airline System Bhd (MASM.KL) swung to a net loss in the second quarter as earnings were hurt by higher fuel spending and fuel hedging losses. [ID:nSGE67C01L]

AirAsia shares have risen by 24 percent since the start of the year, underperforming rival Tiger Airways' 26.5 percent rise and outperforming the Malaysian benchmark's .KLSE 8.3 percent increase.

(Editing by David Chance)