The global airline industry has downgraded its forecast for this year for the third time and now is predicting losses in 2008 of $2.3 billion (£1.1 billion) because of sustained high oil prices.

The International Air Transport Association (IATA), which represents airlines, also said that if oil prices stayed at $135 a barrel, the losses could worsen to more than $6 billion.

Giovanni Bisignani, the director-general of IATA, also criticised the Civil Aviation Authority (CAA) and BAA, the airports operator, for being a “national embarrassment” to Britain.

At the IATA annual conference in Turkey yesterday, the CAA was dubbed “worst regulator of the year” after permitting BAA to increase landing charges by 86 per cent over the next five years.

Mr Bisignani said: “Look at Heathrow: service levels are a national embarrassment, but still the CAA increased charges by 50 per cent over the last five years and plan 86 per cent for the next five. Could anyone in this room ask for a fare increase of 86 per cent? Nobody. That only happens in Monopolyland.”

The Competition Commission is investigating whether to break up BAA's monopoly control of London's airports - Heathrow, Gatwick and Stansted - and the Government has also announced a review of the CAA's regulation of UK airports.

Meanwhile, easyJet, the low-cost operator, has begun a High Court action to stop BAA imposing the landing charge increases.

IATA's prediction that there will be heavy losses in the airline sector this year comes as carriers struggle with rapidly rising fuel costs. Last year the association initially predicted that worldwide profits would be $7.8 billion in 2008, but it reduced this forecast to $5 billion in November and cut it again to $4.5 billion in March.

The global airline industry reported a collective profit of $5.6 billion last year, its first year in the black since 2000. However, rising costs are driving carriers into bankruptcy and Silverjet, the business-class-only carrier that operated from Luton, became the latest to suspend operations last Friday.

More than a dozen carriers have filed for bankruptcy protection or entered administration so far this year, with losses driven primarily in the United States. Carriers in America are more vulnerable because they operate older, less fuel-efficient fleets and are exposed to a slowing domestic economy.

Mr Bisignani said that the aviation industry's health would depend on what happened to oil prices during the remainder of this year. Every $1 rise in the oil price added $1.6 billion to the global industry's fuel bill, he said.

Ryanair, the budget carrier, will give an indication of how severe the industry's problems are in Europe when it reports results for its year to the end of March. Although the airline, Europe's largest by passenger numbers, is expected to report net profits of about €480 million (£379 million), up from €401 million last year, analysts expect Michael O'Leary, its chief executive, to halve the 2008-09 profit forecast.

Andrew Fitchie, analyst for Collins Stewart, has said that Ryanair may have to cut its guidance to €219 million because of the high oil price. He also said that the carrier could ground up to 17 per cent of flights during winter in order to reduce fuel consumption.

Airlines are responding to higher oil prices by increasing fares. Last week British Airways raised its fuel surcharge for the second time in a month - to £218 return for its longest flights.

BA is expected to ground flights this year if the fuel price stays high. Willie Walsh, BA's chief executive, said at the IATA conference: “We will take capacity out during the winter, so I think for the current year we'll probably be looking at flat capacity versus last year. There is no question that airlines will have to increase their prices to offset some of the increase in the fuel cost that we are seeing.”

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