Business travel demand is holding up better than price-sensitive leisure travel in a sign of business confidence and a recovery in world trade, the chief economist of global airlines body IATA said on Tuesday.

Airlines also expect renewed growth in air cargo demand in the second half of this year as movements of capital goods and high-value components pick up, Brian Pearce said.

Air cargo demand soared as the GLOBAL economy emerged from recession last year, driven by restocking and just-in-time supply chains.

Pearce said Chinese domestic traffic, which is often regarded as a barometer of the domestic stimulus in the world's second largest economy, had dipped temporarily as authorities moved to head off inflation but should return to a path of structural growth.

He warned that record deliveries of some 1,300 to 1,400 jet and turboprop aircraft in 2011 created a clear risk of overcapacity in some markets but noted that the aviation industry outlook in Asia ex-Japan remained positive.

Japan, he said, should show a pretty full recovery in aviation traffic by the end of the year as the impact on global supply chains from the March 11 earthquake and tsunami tapers off.

(Reporting by Tim Hepher; Editing by Raju Gopalakrishnan)

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