The International Air Transport Association (IATA) has revised its 2017 industry profitability outlook upwards.
Airlines are expected to report a $31.4 billion profit (up from the previously forecast $29.8 billion) on revenues of $743 billion (up from the previously forecast $736 billion) this year.
But IATA director general and CEO Alexandre de Juniac warned profits are still down on last year.
He said: "This will be another solid year of performance for the airline industry.
"Demand for both the cargo and passenger business is stronger than expected. While revenues are increasing, earnings are being squeezed by rising fuel, labour and maintenance expenses.
"Airlines are still well in the black and delivering earnings above their cost of capital. But, compared to last year, there is a dip in profitability."
In 2017 airlines are expected to retain a net profit of $7.69 per passenger, down from from $9.13 in 2016 and $10.08 in 2015.
The average net profit margin stands at 4.2% (down from 4.9% in 2016).
"Airlines are defining a new epoch in industry profitability. For a third year in a row we expect returns that are above the cost of capital," de Juniac added.
"But, with earnings of $7.69 per passenger, there is not much buffer. That’s why airlines must remain vigilant against any cost increases, including from taxes, labour and infrastructure."
While overall industry performance is strong, major regional variations remain.
About half the industry profits are being generated in North America ($15.4 billion).
Carriers in Europe and Asia-Pacific will each add a $7.4 billion profit to the industry total.
Latin America and Middle East carriers are expected to earn $800 million and $400 million respectively.
Airlines in Africa are expected to post a $100 million loss.
Passenger demand is expected to grow by 7.4% over the course of 2017.
That is the same growth rate as 2016 and 2.3 percentage points higher than previously forecast.
Stronger demand translates into an additional 275 million passengers compared to 2016,
which will bring the total number of passengers expected to fly this year to 4.1 billion.
If achieved, this would be the largest year-on-year growth in absolute passenger numbers so far recorded.
