World airlines are set to lose $4.7 billion this year as a result of the global recession that has shrunk passenger and cargo demand, industry body IATA said.

The International Air Transport Association had estimated in December the industry would lose $2.5 billion in 2009.

The state of the airline industry today is grim. Demand has deteriorated much more rapidly with the economic slowdown than could have been anticipated even a few months ago, Director-General Giovanni Bisignani said on Tuesday.

The relief of lower fuel prices is overshadowed by falling demand and plummeting revenues. The industry is in intensive care.

IATA, which represents 230 airlines including British Airways , Cathay Pacific <0293.HK>, United Airlines , and Emirates , also raised its estimate of international airline losses in 2008 to $8.5 billion, from its previous $8 billion estimate.

The Swiss-based body said its latest forecast was based on a view that the economy and air transport demand would hit bottom by mid-2009 and then start to recover.

We do expect better prospects toward the end of this year or the beginning of 2010, Bisignani told a news conference at Geneva airport.

Leading airlines have slashed fares to encourage continued travel and unveiled a range of cost-cutting measures to stay afloat throughout an economic slump.

Fares should stay low throughout the year while airlines compete for the business that remains until global economic activity rebounds, Bisignani said.

Asia-Pacific carriers will continue to be hardest hit by global economic turmoil and are expected to post losses of $1.7 billion, against the earlier forecast loss of $1.1 billion in 2009, according to the Geneva-based body.

Carriers in North America are expected to deliver the best performance among the world's regions with an estimated $100 million profit, IATA said, crediting their strength to early capacity cuts and relatively little fuel hedging that has permitted them to benefit from sliding oil prices.

And European carriers are expected to lose $1 billion in 2009 as a result of the recession that will continue to drag down both economy and premium demand worldwide.

Nearly 40 airlines worldwide have suspended their operations in the last 15 months because they could not pay their bills, Bisignani said.

International passenger demand fell 5.6 percent in January compared to the same month a year ago, and cargo volumes fell 23.2 percent year-on-year, the eighth consecutive month of contraction for cross-border freight.

IATA's February traffic figures are due to be released later this week. The data excludes domestic flights.

(Writing by Laura MacInnis; Editing by Dan Lalor and Rupert Winchester)

United airlines