By Karamjit Kaur, Aviation Correspondent

GLOBAL air traffic grew just 3.8 per cent in June, compared to a year ago - the smallest increase since the industry was hit by the Sars crisis in 2003.

Cargo volumes went into minus zone for the first time since May 2005, dropping 0.8 per cent.

Passenger load factors - a measure of the number of seats filled - also fell 1.2 percentage points to 77.6 per cent, compared to 78.8 per cent in June last year.

In its latest air traffic update, the International Air Transport Association (Iata) warned of worse times to come.

Director-general and chief executive officer of the 230-member organisation, Giovanni Bisignani said: 'With consumer and business confidence falling and sky-high oil prices, the situation will get a lot worse.'

Iata noted that the global passenger traffic growth of 3.8 per cent was 'well below' the 5.4 per cent recorded year-to-date.

North American airlines saw demand growth drop to 4.4 per cent, a significant slide compared to the 8.2 per cent growth recorded in May.

Domestic traffic in the US contracted by almost 4 per cent.

In Europe, the growth in June was 2.1 per cent - down from 4.1 per cent in May.

Asia Pacific airlines saw their international passenger traffic growth fall to 3.2 per cent, against 4.5 per cent in May, on weakening long-haul destination economies and inflation concerns, Iata noted.

Even in the Middle East where airlines are enjoying a boom, traffic growth slowed to 9.6 per cent in June, from 12.8 per cent the month before that.

Latin American carriers turned in the strongest performance with a 12.5 per cent growth. Strong commodity-driven economic growth in Latin America is the driving force, Iata said.

Sounding the alarm, Mr Bisignani said: 'The airline sector is in trouble. Losses this year could reach US$6.1 billion, more than wiping out the US$5.6 billion that airlines made in 2007.'

'To survive the crisis, urgent action is needed. Airports and air navigation service providers must come to the table with efficiencies that deliver cost savings.

'Labour must understand that efficiency is the only path to job security. And governments must stop crazy taxation and give airlines the freedom to merge and consolidate where it makes business sense.'