The world's airlines are set to lose $5.6 billion next year, more than previously estimated, with rising fuel costs offsetting a rebound in both passenger and air cargo, the industry group IATA said on Tuesday.

In its latest outlook, the International Air Transport Association reaffirmed its projection of a $11 billion loss in 2009 -- a year its chief Giovanni Bisignani called an Annus Horribilis for the highly cyclical sector.

The worst is likely behind us, Bisignani said. For 2010, some key statistics are moving in the right direction.

IATA, whose 230 members include Cathay Pacific <0293.HK>, Lufthansa , United Airlines and Emirates , had previously said the global airline industry would lose $3.8 billion next year.

Renewed consumer confidence should increase the number of people traveling by air next year back to the 2007 peak, Bisignani said. IATA also suggested air cargo volumes would rise quickly in 2010 as businesses rush to replenish their stocks.

Cargo demand is rising faster than world trade as depleted inventories are rebuilt, it said in a statement. Once the inventory cycle completes, growth is expected to fall back in line with world trade.

Crude oil prices should reach an average of $75 per barrel in 2010, up from the $61.80 average for 2009, IATA said.

As a percentage of operating costs, fuel will be 26 percent in 2010. This is considerably lower than the 32 percent of operating costs that fuel comprised in 2008, but twice the 13 percent of operating costs that fuel represented in 2001-2002.

European carriers are on track to generate the largest losses of any region, $2.5 billion, while Asian-Pacific carriers are due to show the most dramatic improvement with losses of $700 million, according to the Geneva-based body.

North American airlines will see their losses shrink to $2 billion, with Latin American carriers the only profitable regional grouping, it said.

Earlier this month IATA said that 75 major airlines reported a combined net profit of $700 million in the third quarter, up from a $3.4 billion loss in that period in 2008.

The darkened IATA outlook for 2010 reflects the experiences of leading carriers and airport operators who have said they are seeing signs the worst may have passed for the global economy, though recovery could come slowly.

Air France-KLM this month said a more dynamic cargo sector supported signs of a slow recovery and Deutsche Lufthansa said air freight volumes were continuing to improve.

Passenger numbers at Frankfurt Airport have also risen as a result of higher demand on routes to America and Asia, the operator Fraport said.

(Writing by Laura MacInnis; Editing by Stephanie Nebehay and Jonathan Lynn)

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