The world airlines' club expects industry losses to be three times greater than originally expected, following September's terrorist attacks in the US.

The International Air Transport Agency (IATA) had forecast losses of $2.5bn (�1.75bn) this year - it now expects losses in the region of $7bn.

This assumes a 15% fall in traffic and capacity, which could lead to a total of 200,000 job losses.

The industry - already suffering from the world economic downturn - has been hit by falling passenger traffic and higher security costs.

'Very testing'

"The next year is going to be bad, it is going to be very testing for the whole industry.

"It has grounded about 8% of its fleet [and] has had to release about 7% of the workforce worldwide," an IATA spokesman told the BBC's World Business Report.

"We hope these jobs will be regained, if not quickly, then in the next year," he added.

Similarly air traffic slumped after the 1991 Gulf War, but picked up again within a year, a fact the industry is clinging to in hope.

The IATA spokesman pointed to the 25% drop in traffic following the start of the Gulf War, but adds that growth became positive again seven months later.