IATA has halved its estimate of 2010 airline industry net losses to $2.8 billion, following evidence of a recovering economic climate.
The association has also cut by 15%, to $9.4 billion, its estimate of net losses for 2009 after a year-end pick-up.
Average air traffic growth is expected to be "much stronger" in 2010. IATA is forecasting an increase of 5.6% in air travel volume and a 12% rise in air freight.
Global revenues in 2010 will rise by 8.8% to $522 billion, but overall fuel costs will increase by 17% to $132 billion.
While airlines in Europe and North America are still facing "sluggish" market growth, it says, there are stronger improvements in such areas as Asia and Latin America.
This is leading to a "two-speed recovery" and a "divergent performance" of airlines in different regions. European carriers are expected to be the poorest performers in 2010, with an overall fall in earnings margin.