US plane maker Boeing is predicting a further contraction in the world economy next year as airlines continue to face challenges and volatility.

But it believes the industry will continue to show robust growth over the long term and that fuel will eventually fall to $US70 to $US80 a barrel.

The manufacturing giant is forecasting global economic growth of 2.8 per cent this year and estimates this will fall to 2.4 per cent in 2009, well below estimated long-term average growth rate of 3.2 per cent.

"As a result of the slowing economy, traffic growth is slowing as well," Boeing Commercial Airplanes vice-president, marketing, Randy Tinseth said in Sydney this week.

"So far this year we’ve seen travel growth world-wide at about 4.5 per cent. As we look towards the end of the year, we think that number will be about 4 per cent, especially if US carriers and other carriers around the world remove capacity from their fleets in order to try and push forward profitability in these challenging times."

The Boeing forecast comes after the International Air Transport Association this month predicted that airlines would lose up to $US10 billion ($12 billion) globally by the end of next year.

The airline umbrella group revised its 2008 forecast to predict the industry would lose $US5.2 billion and said airlines remained in a "perfect storm" of rising costs and falling demand despite a drop in fuel prices. It also predicted the weak financial performance would continue into next year, with further net losses of $US4.1 billion.

Mr. Tinseth said airlines were coping with the dynamic and volatile environment by changing schedules, taking aircraft out of service and redefining their networks to find a more competitive position.

Boeing was also seeing stronger partnerships in many of the alliances as well as mergers and acquisitions.

But he revealed that the US plane maker appears to be benefiting from the hard times as airlines retire older fuel-guzzlers and clamour for replacement aircraft.

Boeing Commercial Airplanes remains over-booked, with more firm orders than production slots, and has only had two cancellations and 50 deferrals so far this year, all of them in the US.

Mr. Tinseth also backed comments by Qantas executives last week that finance for aircraft remained available and that the market continued to see them as good investments.

He said European banks were stepping up to finance aircraft, sovereign wealth funds were moving into the market and 90 per cent of Boeing aircraft were eligible for financing from the Export-Import Bank of the US.

"Just to give you an example, the last aircraft Boeing financed was in early 2006," Mr. Tinseth said.

"So now we're almost 14 or 15 months into a financial crisis and we've yet to finance an airplane in that time."

Boeing points to its track record in accurately forecasting industry trends to back up its upbeat outlook in its latest long-term market forecast.

The forecast notes that air travel grew by an average 4.8 per cent annually over the past 20 years despite two major world recessions, terrorists acts, the Asian financial crisis, SARS and two Gulf wars.

It expects global traffic, as measured in revenue passenger kilometres, to increase by about 5 per cent per year and passenger numbers to grow 4 per cent annually as a result of the 3.2 per cent rise in annual GDP.

Cargo is expected to increase by 5.8 per cent annually -- down from more than 6 per cent a year in previous forecasts.

"The fastest-growing economies will lead the transformation into a more geographically balanced market," the forecast said. "More productive, new airplanes will play a greater role and there will be a relentless pursuit of further environmental progress."

Environmental pressures and improved aircraft efficiency will also mean that 82 per cent of the 2027 fleet will be planes that do not exist today.

Overall, Boeing estimates the world will need 29,400 new aircraft worth $US3.2 trillion over the next 20 years. Of these, about 3 per cent will be in the 747 and above category, 23 per cent will be twin aisle, 65 per cent single aisle and 9 per cent will be regional jets.

The fleet is expected to be more productive and each plane will carry about 40 per cent more traffic than the average jet today.

This means that fewer aircraft will be needed to accommodate the same volume of travel, translating to a 3.2 per cent annual age growth in the fleet to carry a 5 per cent rise in traffic.

One spin-off of this will be the demise of smaller regional jets, with higher oil prices making 50-seaters uneconomical and airlines upgrading to 70-seaters or bigger. The move to bigger planes, for environmental reasons and to beat airport congestion, will push the percentage of jet flights conducted by single aisle planes from 72 per cent to 82 per cent over the next two decades. Small to medium size twin-aisle jets will also increase their share of regional services, mostly because of growth in Asian markets.

The Asia-Pacific, which is expected to recorded a 4.1 per cent annual growth in GDP and a 6.7 per cent annual rise in traffic, will account for almost 45 per cent of passenger traffic by 2027 and will need more than 9100 aircraft worth $US1.2 trillion over the next two decades. Chinese domestic traffic by this stage will be bigger than traffic in the Europe-to-Asia-Pacific, trans-Pacific and North Atlantic markets. North America, which will account for about 35 per cent of the market in terms of RPKs, will need 8550 planes worth $US740 million while Europe, which will also have a 35 per cent share in traffic, will need about 6900 planes worth about the same amount.

In Oceania, a strong propensity to travel by Australians, who average 2.8 trips a year, and New Zealanders, who average three trips a year, will help drive annual traffic growth averaging 5.2 per cent over the next two decades. This is despite a slightly lower than average GDP growth rate of 3.1 per cent.

"Most of this growth will be within the Asia-Pacific," Mr. Tinseth said.

"So we have travel within the continent, travel to Southeast Asia, to north-east Asia and China clearly being the biggest drivers."