Painting a gloomy picture for the global aviation industry for next year, the International Air Transport Association today said Indian carriers could expect a drop in demand for air travel, particularly after the Mumbai terror attacks two weeks back.

Forecasting a 'major shift' in performance of carriers in India and China, IATA chief Giovanni Bisignani said the airline industry in these two 'robust emerging markets' would face 'a much more substantial slowdown' in 2009 and asked the the two governments to take corrective steps to help the ailing business.

He said India should take urgent steps to create the Airport Economic Regulatory Authority as the legislation to give effect to it had been passed over a month ago.

'Fighting crazy taxation regime' in various countries is a priority for the airline industry, he said further.

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The Airport Economic Regulatory Authority Bill, awaiting the presidential assent, empowers the authority fix tariff structures and to ensure a level-playing field for airlines.

"The outlook is bleak. The chronic industry crisis will continue into 2009 with $2.5 billion in losses. We face the worst revenue environment in 50 years or since the IInd World War," he said.

The global industry losses forecast for 2008 calender year stood at $5 billion, a slight improvement from the earlier prediction of $5.2 billion.

Releasing the global airline body's annual financial forecast and reports on industry trends at the headquarters here, Bisignani and IATA's chief economist Brian Pearce said the airlines in Asia-Pacific region would see losses more than 'doubling' from $500 million now to $1.1 billion in 2009 and predicted a five per cent drop in the cargo market.

"The region's largest market Japan is already in recession. And the two main growth markets --- China and India -- are expected to deliver a major shift in performance," IATA economist Pearce said.

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Growth in China would slow as a result of a drop in its exports, he added.

"India's carriers, which are already struggling with high taxes and insufficient infrastructure, can expect a drop in demand following the tragic terror incidents (Mumbai attacks) in November," the IATA economist said.

However, the European carriers would experience the largest increase-- by ten-folds-- in losses to $1 billion, while airlines of West Asia and Latin America would double their losses to $200 million each.

".... for governments, it's a wake up call to stop crazy taxation, fix the infrastructure, give airlines normal commercial freedoms and regulate monopoly suppliers," Bisignani said.

Bisignani said there may be job losses by around five per cent in the aviation industry, which employs 32 million people worldwide. That would mean a cut of over 1.7 million jobs around the world.

Substantial numbers of jobs 'are likely to be lost and as a result, damage consumer incomes and confidence further,' Pearce said.

He also predicted a fall of three per cent in passenger markets next year.

The top IATA officials also released reports on the status of global aviation infrastructure, safety and security, environment and measures to further liberalise the sector.

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