Global airlines more than halved their forecast for 2011 industry profits on the back of high oil prices and turmoil in Japan, North Africa and the Middle East.
Industry body IATA, whose airlines claim to carry 93 percent of global passenger traffic, said on Monday it expected industry profits of $4 billion in 2011, down from a previous forecast of $8.6 billion.
The efficiency gains of the last decade and the strengthening global economic environment are balancing the high price of fuel, IATA Director General Giovanni Bisignani told the group's annual general meeting in Singapore.
But with a dismal 0.7 percent margin, there is little buffer left against further shocks.
Economists say the industry's outlook is a guide to the strength of cyclical recovery in developed markets and growth in emerging economies, which rely heavily on air transport.
The 230-member International Air Transport Association also revised up its estimate for profits in 2010, to $18 billion from $16 billion.
Airlines rebounded faster than expected from recession last year, helped by higher traffic and a drive to keep a lid on spare capacity. But a series of external shocks and higher oil prices have hit the industry hard this year.
Airlines had been bracing for lower 2011 forecasts at this week's major conference as fears grow over the global economy.
IATA is forecasting a $110 per barrel average oil price in 2011, up 15 percent from $96 last year.
It issued a warning that capacity was set to expand 5.8 percent in 2011, outstripping a 4.7 percent increase in demand. The 1.1 percentage point gap is sharply higher than 0.3 percent previously forecast.
Bisignani has said a lack of discipline as airlines jostle for market share could dent the industry's recovery.