"The industry has shifted gears downward," said Tony Tyler, director-general of the International Air Transport Association.

"The pace of growth in passenger markets has dipped and the freight business is now shrinking at a faster pace.

"With business and consumer confidence continuing to slump globally, there is not a lot of optimism for improved conditions any time soon," he added.

European airlines posted the strongest growth in international air traffic in August, rising 7.9 percent, as strong exports led to increased international business.

Asia-Pacific airlines also recorded 5.3 percent increase in demand.

North American carriers meanwhile recorded weak growth of 2.9 percent, "a sharp downturn from stronger growth earlier in the year," said IATA.

However, freight demand declined, with overall traffic down 3.8 percent, more than double the 1.8 percent drop recorded in July.

"In 2011 air freight reflected the lack of growth in overall world trade volumes. This latest decline shows a further deterioration in global economic conditions," said IATA.

North American carriers posted the biggest fall of 7.0 percent for August, while Asia-Pacific airlines recorded a decline of 5.4 percent.

European airlines also indicated a drop of 1.8 percent, said IATA.