The global airline industry remains on course to enjoy its second consecutive year of improved profitability.

In its latest report, the International Air Transport Association (IATA) stated this is despite having to downgrade its outlook for the sector in the wake of the rising cost of jet fuel. It now believes profits will be around $18.7 billion (£11 billion), as opposed to its earlier prediction of $19.7 billion.

This is as a result of the price of oil increasing to an average of $108 per barrel, which is $3.5 above previous estimations. The association claimed global tensions, including the unrest in Ukraine have contributed to this rise.

Despite this potentially adding around $3 billion to the industry's fuel bill, IATA claimed this will be offset by an increase in demand, especially for air freight. Meanwhile, passenger numbers are also expected to go up this year, with airlines anticipating to welcome 5.8 per cent more holidaymakers over 2014. This is weaker than the initial prediction of six per cent, but is still greater than the 5.3 per cent achieved last year.

Tony Tyler, director-general and chief executive officer at IATA, commented: "The cyclical economic upturn is supporting a strong demand environment. That is compensating for the challenges of higher fuel costs relating to geo-political instability."

He also anticipated every region would see an increase in profit over the coming year. This ranged from the $1 billion expected in Latin America, up to $100 million for African airlines.