Airlines worldwide are expected to post a higher combined profit of $US12.7 billion in 2013, in what will be their third-best year since 2001 when terrorist attacks in the United States crippled the industry.
Despite the better outlook, the International Air Transport Association emphasised carriers were still operating on thin profit margins of 1.8 per cent - $US4 per passenger, or not much more than the price of a cup of coffee in Australia.
The latest outlook from the association is an improvement of $US2.1 billion on March when it was forecasting a combined profit of $US10.6 billion.
The IATA has attributed the better outlook to airlines boosting revenue from ancillary services and better capacity utilisation. Airlines are filling just more than 80 per cent of seats on their planes, a record high.
Weaker oil prices are also helping, expected to average $US108 a barrel this year, compared with almost $US112 a barrel in 2012.
While passenger traffic is improving, the cargo market is depressed due to weak demand in developed countries, particularly Europe.
Airlines in the Asia-Pacific region are again the leaders in profitability. The region is expected to post a combined profit of $US4.6 billion this year, up $200 million from IATA's previous forecast in March.
Despite the stronger forecast, IATA chief executive Tony Tyler said the challenges of keeping revenues ahead of costs "remain monumental". "Many airlines are struggling. But there is a core of airlines that are driving profits with solid performance," he said at IATA's annual meeting in Cape Town.