Global airline traffic, both passenger as well as cargo declined sharply in the month of January as passengers withhold their travel plans and businesses lower their corporate travel policies, said the International Air Transport Association (IATA).

Global airlines are set to post $2.5 billion in losses in 2009 as revenues are likely to shrink by $35 billion to $500 billion, said IATA.

Represents 230 airlines comprising 93 per cent of scheduled international air traffic, IATA said that international scheduled traffic results for January showing a deepening year-on-year demand slump as international passenger demand fell by 5.6 per cent in January 2009 compared to the same month in 2008.
 
The January decline was the fifth consecutive month of contraction and a full percentage point worse than the 4.6 cent year-on-year drop recorded in December.

The 5.6 per cent drop in passenger demand outpaced capacity cuts of 2.0 per cent driving the load factor to 72.8 per cent - 2.8 per cent below what was recorded for January 2008, said IATA.

The world's largest airline by market value, Singapore airlines is fighting with lower travel and cargo demand and has cut flights to some Asian cities and may put future aircraft orders on hold.

The decline was not restricted to passenger traffic only as the cargo markets, which registered a 22.6 per cent drop in December worsened in January 2009 with a 23.2 per cent year-on-year demand drop making it the eighth consecutive month of contraction for freight traffic.

''Alarm bells are ringing everywhere. Every region's carriers are reporting big drops in cargo and aside from the Middle East carriers, passenger demand is falling in all regions. The industry is in a global crisis and we have not yet seen the bottom,'' said Giovanni Bisignani, IATA's Director General and CEO.

Asian carriers led the decline in passenger demand with an 8.4 per cent year-on-year drop in January as capacity in the region contracted 4.3 per cent with Japan, the region's largest market for air travel, will register the biggest fall in 2009 as its economy contracts by an unprecedented 5 per cent.

North American carriers posted the second largest passenger decline at 6.2 per cent led by a decline in Trans-Pacific travel while European carriers offset a 5.7 per cent decline in demand with a 3.6 per cent decrease in capacity.

Latin American carriers saw a modest decline of 1.4 per cent, African carriers saw the demand decline slow from an average 4.0 per cent in 2008 to 2.6 per cent in January while the Middle East was the only region with a positive traffic growth of 3.1 per cent.

With these dismissal figures, ''Airlines remain in intensive care, but while others ask for government bailouts, our demands on governments are much more modest. First, don't tax us to death in order to pay for investments in the banking industry. This includes the UK government's plans to increase its multi-billion pound Air Passenger Duty and the Dutch Government's misguided departure tax,'' said Bisignani.

In 2008, even as governments delivered tax breaks to stimulate economic growth, the airline industry took on an additional tax burden of $6.9 billion.