Freight volumes are up 3%, however, passenger yields are still 15% below peak levels and IATA expects losses for 2010 could be $5.60 billion

Airlines have started witnessing improvement in demand, but instead of profits they might register losses to the tune of $5.60 billion this year, the latest International Air Transport Association (IATA) report has said.

"The 3% increase in freight volumes from December to January is particularly encouraging. We can start to see the future with some cautious optimism. But better volumes do not necessarily mean better profits. Passenger yields are still 15% below peak levels and we expect 2010 losses to be at $5.60 billion," IATA director-general and chief executive Giovanni Bisignani said in a statement.

IATA has also said that demand for international scheduled air traffic has showed improvement in January this year. January passenger demand was up 6.4%, while a 1.2% increase in capacity pushed load factor to 75.9% compared to last year, it said.

International cargo demand showed a 28.3% improvement with a 3.7% increase in capacity, pushing load factor to 49.6%, which is a significant change from 40.1% recorded in January 2009.

The year-on-year increases reflect a steady improvement from the precipitous fall in demand that characterised the early part of 2009, rather than merely a dramatic improvement in the month this year, the report said.

However, demand must improve by a further 2% to return to the peak levels of early 2008, IATA said. But improvements are also geography-based, the report added.

The best signs of improvement have been seen in markets with strongest economic recovery like Asia, Latin America and the Middle East.

Asia-Pacific carriers experienced 6.5% increase in demand compared to the previous year. The region, which is leading the global economic recovery, has realised 31% demand improvement, while those in North America and Europe saw it increase by 2.1% and 3.1%, respectively.

Middle Eastern carriers grew throughout the recession with growth accelerating to 23.6% in January, IATA said.