The outlook for the airline industry is improving, with profits expected to reach $US4.1 billion ($3.98 billion) this year and $US7.5 billion in 2013, the International Air Transport Association (IATA) says.

The industry group raised its forecast for 2012 from $US3 billion, saying passenger numbers so far this year were robust.

"Airlines are keeping their heads above water better than we expected," IATA chief executive Tony Tyler told reporters on Monday.

But he noted that profits this year will still be less than half the $8.4 billion the industry earned in 2011.

Tyler blamed Europe's economic crisis, oil prices averaging $110 a barrel, weak cargo demand and low business confidence for the slowdown.

A profit of $4.1 billion on industry revenues of $636 billion equates to a margin of just 0.6 per cent, Tyler noted.

Europe's airlines are expected to record a loss of $1.2 billion this year due to the eurozone financial crisis and high taxation, IATA said.

It projected a $2.3 billion profit for companies in the Asia-Pacific region, despite a modest slowdown in the Chinese economy.

"Chinese domestic demand is still growing at nearly 10 per cent and the demand for regional and long-haul travel, including in the premium classes, has held up better than expected in the face of economic uncertainty," Tyler said.

The greatest improvement is seen for North American carriers, where IATA raised its profit forecast by $500 million to $1.9 billion, thanks to cost savings.

Middle East and Latin American airlines are also expected to post a profit, while African carriers will break even, said IATA.

The group represents 240 of the biggest international airlines.

AP