Global air traffic is increasing but the airline industry remains "a long way from profitability", according to IATA.

The International Air Transport Association said its figures for the first quarter of 2005 show overall passenger growth of 9.4 percent, with load factors at 73.7 percent.

Capacity expansion in all regions for the first quarter was below traffic growth, which had pushed load factors higher.

But while the growth figures were "good news", oil prices in the US$50 per barrel range meant the industry was "a long way from profitability," Giovanni Bisignani, IATA Director General and CEO, said.

"However you look at it, 2005 is shaping up to be another difficult year for the airlines. Intensified cost cutting and better aircraft utilisation are steps in the right direction. But they cannot keep pace with the increases in the industry's fuel bill," he said.

Mr Bisignani said fundamental and large-scale change to the industry, including cost efficiences in airport and air navigation services, would be "absolutely critical" to the industry.