North American airlines are likely to be hit hardest in the next two years, which Bisignani said would be tough for an industry whose fortunes are closely tied to economic swings.

Many carriers have already raised ticket prices, imposed fuel surcharges and cut flight capacity. Several have sought mergers and partnerships to save costs.

Bisignani said governments should not stand in the way of airline consolidation. "In this difficult moment, everything must be done to facilitate those types of processes," he told the telephone briefing.

WEAK RESULTS

Air France-KLM , Iberia , Cathay Pacific <0293.HK> and Singapore Airlines are among those who have posted weak results in past months, while British Airways said the economic slowdown and soaring fuel costs had created the worst trading conditions it had endured.

Japan’s All Nippon Airways <9202.T> and Japan Airlines <9205.T> have stopped flights on certain routes and Bisignani said 26 or 27 airlines have suspended operations or shut down in the last year -- more than in the wake of the September 11, 2001 attacks when airlines previously suffered tough conditions.

The IATA chief said the airline industry could break even in 2009 if oil prices declined to an average of $95 per barrel. But he said the economy also needed to regain strength for carriers to benefit from a resumption of business travel.

IATA’s July traffic figures showed passenger demand for international flights rose just 1.9 percent over the same month last year.

Even more worryingly, Bisignani said, air cargo declined 1.9 percent over July 2007 in a second straight monthly decline. And the Asia-Pacific region, which comprises more than half of the world air cargo market, saw freight traffic drop 6.5 percent year-on-year in the month.

"The cargo is a bit of a thermometer of the economy ... If cargo goes down, it means that economies are slowing," Bisignani said, stressing that all signs pointed to a turbulent 2009. "Fasten your seatbelts for at least another two years."

(Additional reporting by Robert Evans; editing by Rory Channing and David Holmes)