UPDATE 1-Malaysian Air posts Q1 loss, takes fuel hedging hit

* Q1 net loss 695 mln ringgit, using new accounting rules

* 3.8 bln ringgit charge due to fair valuation of fuel hedges

* Potential 1.1 bln ringgit Q2 fuel hedge gain if oil $66/bbl (Adds details)

By Soo Ai Peng

KUALA LUMPUR, June 12 (Reuters) - National carrier Malaysian Airline System (MAS) (MASM.KL) posted its first quarterly loss in two-and-half years, hit by a triple whammy of overcapacity, volatile fuel prices and a global slump that hit passenger and cargo demand.

The airline said it had revalued its fuel hedges under new accounting rules to reflect their market value and took a first-quarter charge of 3.8 billion ringgit ($1.1 billion), but said it could see a 1.1 billion ringgit gain if oil prices averaged $66 a barrel in the second quarter.

Analysts predict competition will intensify amid weak demand and fresh capacity coming onstream from full-service and budget airlines in the region.

Singapore Airlines (SIAL.SI), the world's largest carrier by market value, last month reported a sharp drop in its quarterly net profit, hit by fuel hedging losses and a weak travel market, and also warned that the H1N1 flu outbreak could delay air travel recovery. [ID:nSIN451871]

MAS reported a January-March net loss of 695 million ringgit ($198.5 million) versus a year-earlier profit of 120 million ringgit. It said it had a first-quarter fuel hedging loss of 557 million ringgit, and an operational loss of 138 million ringgit.

"This is the first operational loss for Malaysia Airlines since the third quarter of 2006 as it faced a triple squeeze, overcapacity, extreme fuel volatility and a global slump which hit passenger and cargo demand," the airline said in a statement.

The International Air Transport Association said on Monday the global airline industry faces an unprecedented crisis and is likely to lose $9 billion this year, nearly double an estimate made just three months ago. [ID:nSP478955]

Before the latest results, analysts were expecting MAS to post 2009 net profit of 187 million ringgit, according to Reuters Estimates, down from 244 million ringgit last year.

MAS shares have risen 6.5 percent this year, trailing a 24 percent gain on the main Malaysian stock index .KLSE. Trading in the stock was suspended on Thursday. (Additional reporting by Julie Goh) (Editing by Ian Geoghegan)