The aviation industry is this year set to enjoy profits more than three times greater than previously predicted.

The International Air Transport Association has revised its estimate of overall profits of $2.5 billion, forecast in June, to a total of $8.9 billion.

However, it is warning this peak may be unsustainable for long, with profits expected to drop to $5.3 billion in 2011.

Giovanni Bisignani, IATA’s director general and chief executive, said: “The industry recovery has been stronger and faster than anyone predicted.

“The $8.9 billion profit that we are projecting will start to recoup the nearly $50 billion lost over the previous decade.

“But a reality check is in order. There are lingering doubts about how long this cyclical upturn will last.

“Even if it is sustainable, the profit margins that we operate on are so razor thin that even increasing profits three and a half times only generates a 1.6% margin.

“This is below the 2.5% margin of the previous cycle peak in 2007 and far below what it would take just to cover our cost of capital.”

Bisignani said the improved profits were thanks to increased demand pushing traffic levels up to 4% ahead of early 2008, leading to an overall increase in demand of 11% this year. Capacity will have expanded by 7% this year.

The discrepancy between demand and capacity growths has led to a 7.3% increase in passenger yields and 7.9% for cargo yields, both well up on the 4.5% previously predicted.

However, the industry is expected to suffer next year when a combination of lower consumer spending, continued high joblessness and falling consumer confidence continue to impact it.

Bisignani said: “This year is as good as it gets for this cycle. Governments are running out of cash for pump priming.

“Unemployment remains high and business confidence is weakening and we expect the 3.2% GDP growth of 2010 to drop to 2.6% in 2011.

“As a result, 2011 is looking more austere. We see profitability falling to $5.3 billion with a margin of 0.9%.”