MONTREAL - Canada's aerospace sector stands to get a boost from an international airlines group's improving industry outlook, with profits expected to reach US$4.1 billion this year and US$7.5 billion in 2013.

The International Air Transport Association on Monday raised its forecast for 2012 from US$3 billion, saying passenger numbers so far this year were robust.

"Airlines are keeping their heads above water better than we expected," IATA Chief Executive Tony Tyler told reporters in Berlin.

But he noted that profits this year will still be less than half the US$8.4 billion that the industry earned in 2011.

Tyler blamed Europe's economic crisis, oil prices averaging US$110 a barrel, weak cargo demand and low business confidence for the slowdown.

A profit of US$4.1 billion on industry revenues of US$636 billion equates to a margin of just 0.6 per cent, up from 0.5 per cent in the prior forecast, Tyler noted.

Benoit Poirier of Desjardins Capital Markets said the improved profit forecast next year is positive for Canadian-based aerospace companies such as Bombardier (TSX:BBD.B), CAE Inc. (TSX:CAE), Transat A.T. (TSX:TRAZ.B) and Heroux-Devtek (TSX:TRZ.B) since profitability is typically linked to aircraft orders.

"We believe the street will see the upward revision to IATAs 2012 outlook and the solid improvement expected for 2013 as a positive surprise," he wrote in a report.

Poirier said the slightly higher forecasted profit margins demonstrates the considerable improvement in the performance of airlines in a challenging environment.

In the past, slowing demand and increasing aircraft deliveries resulted in falling passenger load factors and aircraft utilization. This time, however, airlines have kept those numbers high.

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Canadian aerospace sector expected to get boost from higher airline profits