The global airline industry is expected to record a net profit of 2.5 billion U.S. dollars in 2007, up from the previously forecast profit of 1.9 billion U.S. dollars, the International Air Transport Association (IATA) said on Tuesday.

In data released at its annual media presentation in Geneva, the association also cut its forecast for airline losses this year to 500 million U.S. dollars, against the 1.7 billion-U.S.-dollar forecast earlier.

Brian Pearce, IATA chief economist, said the industry improvement in 2006 reflected increasing efficiency and steady growth in passenger numbers. "We now see the industry as doing much better despite the oil shock which pushed up its costs."

IATA represents 270 airlines from 143 countries and is the leading body for the global airline industry.

It said its higher 2007 profit forecast reflected a drop in the price of jet fuel from a peak of 93 U.S. dollars a barrel.

Still, it cautioned there was limited scope for further significant energy price declines in 2007, and the business environment was expected to become tougher due to a global economic slowdown.

"Oil and jet fuel prices have fallen substantially from their peak in August, but we are taking a cautious view over where fuel costs are going in 2007," Pearce said.

Improvements in operating profitability are likely to stall and subsequent increases in profitability are expected to be slower due to a combination of ongoing high fuel costs and global economic conditions, he added.