The industry losses will fall further to $4.3 billion next year, IATA said at its annual general meeting in the Malaysian capital.
CEO Giovanni Bisignani said the industry had racked up accumulated losses of $42 billion over the last five years, but the $30 decline in jet-fuel prices would help airlines perform better.
Efficiency gains have helped airlines improve their break-even points.
"The break-even price for crude went from $22 per barrel in 2003 to $34 in 2004 to $48 in 2005. In 2006, we expected to break even at $50. But it was not until 2007 that we saw a profitable break-even price of $55," he said.
Chief economist Brian Pierce said the organisation revised its average fuel price for this year down to $54-$55 per barrel from $57.
However, margins still remain thin due to high operating costs such as personnel, he said.
According to IATA, European carriers are expected to lose $1.3 billion this year, but Asian airlines will show a profit of $1.5 billion this year and $2 billion next year.
Bisignani called on airline partners, particularly airports, to play a greater role in improving efficiency in order to help airlines reduce operating costs.
Many airports are sticking to a dying business model with no commercialisation, but Singapore's Changi and Australia's Melbourne and Brisbane are progressive and commercially minded players in the business, he added.