Airline passenger growth is slowing, freight markets are shrinking and there is not much optimism for improved conditions, says the International Air Transport Association.
The association, which represents about 230 airlines, said passenger demand in August was up 4.5 per cent on the previous year compared with 6 per cent in July.
The decline in freight markets had accelerated, contracting by 3.8 per cent in August compared with the previous year - more than double the drop of 1.8 per cent in July, it said.
Association director-general and chief executive Tony Tyler said the industry had shifted gears downward.
"The pace of growth in passenger markets has dipped and the freight business is now shrinking at a faster pace.
"With business and consumer confidence continuing to slump globally there is not a lot of optimism for improved conditions any time soon."
August traffic results were in line with expectations for a decline in profitability heading into 2012, with total industry profits expected to fall from US$6.9 billion in 2011 to US$4.9 billion, the association said.
"Economic uncertainty owing to the European sovereign debt crisis and the growing likelihood of a protracted period of slow growth in developed economies mean the industry will be even more focused on reducing costs and improving efficiency," said Tyler.
The airline industry had historically delivered collective losses when gross domestic product (GDP) growth fell below 2 per cent, the association said.
GDP growth was expected to be 2.5 per cent this year, with 2.4 per cent projected for 2012.
Tyler said: "To ensure that airlines can continue to catalyse economic activity, we need Governments to review the often onerous tax burden that they place on aviation."