A tough second half of the year has been predicted for airlines due to declining passenger demand and rising fuel prices.

The warning came from Iata against a backdrop of economic uncertainties which saw demand fall in July across the globe with the exception of Africa, the Middle East and domestic services in China.

The slowdown in travel growth is being driven largely by the recent fall in business confidence in many economies.

Director general and chief executive Tony Tyler said: “The uncertain economic outlook is having a negative impact on demand for air transport.

“The cargo business is 3.2% smaller than it was a year ago. And passenger markets—with the exception of Africa, China-domestic and the Middle East—saw demand fall from June to July.

“Overall passenger demand is still up 3.4% on the previous July. But the growth trend is clearly slowing. This, along with rising fuel prices is likely to make it a tough second half of the year.”

Airlines have responded by reducing capacity added to markets, a move which has stabilised load factors at relatively high levels and provided some support for profitability in the face of high fuel prices, Iata said.

In July passenger capacity rose 3.6%, in line with the expansion of traffic, keeping the load factor at a relatively high 83.1%.

European carriers recorded growth on international services of 4.8% in July, down from 7.3% the previous month, with an average load factor of 85.7%.

“Despite the recession in many European home markets, airlines from the region have been able to sustain growth on long-haul markets to regions where economic growth is strong,” Iata said.

Tyler added: “The huge success of the London Olympics was also an important reminder of the vital role that international aviation plays in bringing the world together and facilitating global mega-events.

“Now all eyes are on Brazil which will host the 2014 World Cup and the 2016 Olympics. And aviation will play a key role there as well.

“It will take a team effort to ensure that Brazil’s aviation infrastructure is up for the challenge,” he added.