Airline passenger numbers could double to 8.2 billion over the next 20 years with the Asia-Pacific region driving the greatest growth.
An increasing shift eastwards in the centre of gravity of the industry will be behind the continued strong growth up to 2037, Iata forecasts, based on current trends in air transport.
India will take third place after the US, surpassing the UK by around 2024.
But the aviation trade body warned that protectionism could reduce the benefits of aviation.
The forecast anticipates a 3.5% compound annual growth rate (CAGR) over the next two decades, leading to a doubling in passenger numbers from today’s levels.
However, the growth prospects and economic benefits driven by aviation, could be curtailed if protectionist measures are implemented by governments.
Iata director general and CEO Alexandre de Juniac said: “This forecast is a cautionary warning to governments. First, the industry will grow but they must clear the infrastructure bottlenecks to bring that growth to their home markets.
“And secondly, governments must understand that globalisation has made our world more socially and economically prosperous. Inhibiting globalization with protectionism will see opportunities lost.”
He added: “Aviation is growing, and that is generating huge benefits for the world.
“A doubling of air passengers in the next 20 years could support 100 million jobs globally.
“There are two important things that stand out about this year’s forecast.
“Firstly, we are seeing a geographical reshuffling of world air traffic to the east.
“And secondly, we foresee a significant negative impact on the growth and benefits of aviation if tough and restrictive protectionist measures are implemented.”
Growth in the Asia-Pacific region is being driven by a combination of continued robust economic growth, improvements in household incomes and favourable population and demographic profiles, according to the Iata projections.
China will displace the US as the world’s largest aviation market – defined as traffic to, from and within the country – in the mid-2020s. The rebalancing of China’s economy towards consumption will support strong passenger demand over the long term.
Indonesia is forecast to be a standout performer – climbing from the world’s tenth largest aviation market in 2017 to the fourth largest by 2030.
Thailand is expected to enter the top ten markets in 2030, replacing Italy which drops out of the ranking.
Should protectionism continue to expand in a “reverse globalisation” scenario, aviation would continue to grow, but at a slower pace and deliver fewer economic and social benefits, according to Iata.
Under a liberalised environment connectivity would generate significantly more jobs and GDP growth, the association argued.
“Global prosperity depends on air connectivity. Aviation is sensitive to policies that either support or undermine growth. And these seem to be pointing in the wrong direction,” said de Juniac.
“Dampening demand for air connectivity risks high quality jobs, and economic activity dependent on global mobility.