Iata has upgraded its forecast for global airline profitability this year following a strong performance in the second and third quarters.

Airlines are expected to return a profit of $6.7 billion, up from the $4.1 billion forecast by Iata in October despite high fuel prices and a slowing world economy,

This is expected to improve slightly to $8.4 billion in 2013, better than the $7.5 billion forecast in October.

But industry net post-tax margin will remain weak at 1% in 2012 and 1.3% in 2013, with European airlines only just breaking even.

Iata director general and chief executive Tony Tyler said: “With GDP growth close to the ‘stall speed’ of 2% and oil at $109.5 a barrel we expected much weaker performance.

“But airlines have adjusted to this difficult environment through improving efficiency and restructuring. That is protecting cash flows against weak economic growth and high fuel prices.”

He added: “It’s a diverging picture. Economies of scale are helping larger airlines to cope much better with the difficult environment than small and medium-sized carriers which continue to struggle.”

Overall performance has been positively impacted by strong passenger traffic growth (5.3%) and a 3.0% improvement in yields.

Business travel was supported by more robust international trade in goods and service despite the slowing world economy. This contributed to a positive picture for both passenger volumes and yields, Iata said.

Iata expects European carriers to break even this year. That is $400 million worse than last year’s performance, but $1.2 billion better than the October forecast.

This is largely attributable to the results of efficiency drives and stronger traffic growth which drove improved results in the second and third quarter.

But the continent’s carriers remain in the weakest financial position of all global airlines, Iata warned.

Tyler said: “Prospects for 2013 will be largely unchanged from 2012. Net profits are expected to rise to $8.4 billion leaving the industry with a 1.3% net profit margin.

“It is good that we are moving in the right direction, but the year ahead is shaping up to be another tough one for the industry.”