Singapore Airlines (C6L.SG) +0.9% at $15.84, Tiger Airways (J7X.SG) +1.1% at $1.87, faring better than the broader market though with both stocks are trading in low volume.

DBS, which rates the former at Buy, the latter at Hold, says there are “plenty of reasons to buy into regional airlines,” with the earnings rebound they enjoyed in 2010 likely to continue into 2011, albeit at a slower pace.

DBS expects passenger capacity growth “to be easily taken up by growing air travel demand in the region, spurred on by strong economic growth and rising consumer affluence.”

Says SIA could return some of its surplus net cash of around $4.5 billion to shareholders and/or make an acquisition to boost its long-term earnings prospects.

Adds, key risks include lower-than-expected demand for seats and/or higher-than-expected capacity intensifying competition (reducing load factors) or price competition (resulting in lower yields).