An international air transport association says soaring fuel costs will cause the world’s airlines to lose US$5.2 billion in 2008, reversing a US$5.6 billion profit in 2007.

North American carriers are expected to suffer the most, accounting for US$5 billion of the total, says the Montreal-based International Air Transport Association (IATA).

Asia Pacific profits will be cut to US$300 million, one-third of their 2007 total.

IATA director general Giovanni Bisignani says “the situation remains bleak” as high oil prices and falling demand hurt the industry;s profitability.

Airline passenger traffic in July fell 1.9% compared to 2007, the lowest level in five years.

As a result of the weaker economic outlook, IATA significantly revised downward its traffic forecast for domestic and international markets combined.

Passenger traffic is now expected to grow on average by 3.2% (was 3.9%) and air freight volumes by just 1.8% (was 3.9%). This is only half the pace of expansion seen in 2007 and is boosted by the stronger growth seen at the start of the year.

“Strong traffic growth allowed the industry to partly absorb the rise in fuel costs from 2003-2007. This is no longer the case,” IATA says.