The looming "sequester" spending cuts of $85 billion to take effect in the U.S. on March 1 could pose a threat to the global airline industry, said Tony Tyler, director general and CEO of the International Air Transport Association (IATA).
"The sequestration issue could be a problem if that goes ahead. The Federal Aviation Administration [FAA] has already put out a notice to the industry on the measures they may have to take, which could be reductions in capacity or operational disruptions, and that's something we may need to keep an eye out for," Tyler told CNBC.
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The budget cuts are expected to impact a range of sectors including airports. The U.S. airports' security is government funded, and industry participants have lashed out against spending cuts saying they will lead to a reduction in the size of the Transportation Security Administration (TSA) and the FAA workforce.
(Watch video: LaHood: Sequester Will Lead to Delays in Air Travel - CNBC)
The potential reduction of air traffic control and baggage screening staff has also led to security concerns, but IATA's Tyler dismissed any impact these cuts might have on airline safety.
"No, there will not be any safety issues. It is too early to tell how this will effect operations in the industry. But it could be a difficult time for airlines operating within and to and from the U.S.," he said.
According to IATA, which represents 240 airlines, the industry reported a profit of $6.7 billion in 2012 and it has recently revised up its profit forecast for 2013 to $8.4 billion from $7.5 billion.
Despite concerns over the impact of the U.S. spending cuts on the airline industry, Tyler said he saw a modest improvement in the global airline industry in the year ahead.
"The macro conditions are better than last year. We expect fuel prices to come down from $110 per barrel to $104 per barrel. Consolidation in the sector is helping and we expect Europe to have a muddle through scenario this year, but not a crisis," he said.
Separately, Tyler acknowledged that the grounding of Boeing's 787 Dreamliner jets was an important issue for the airlines involved, but was less significant on an industry level.
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All Boeing 787 Dreamliners have been out of action since early January, while U.S. and Japanese investigators look into the cause of two accidents associated with the plane's lithium-ion batteries.