UPDATE 1-Air travel rises, freight demand falls in Oct -IATA

* Air passenger demand rises 0.5 pct in October-IATA

* Freight demand falls 0.5 pct

* European carriers see most weakness in freight demand

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ZURICH, Nov 30 (Reuters) - Passenger demand for air travel rose in October but freight demand continued to fall, especially in Europe, data showed on Monday, indicating the global economic recovery remains fragile.

Data from the International Air Transport Association (IATA) showed passenger demand rose 0.5 percent on the same month a year before while freight demand fell 0.5 percent after a 5.4 percent drop in September.

"Cargo traffic is 14 percent above the December 2008 low point but remains 15 percent below the early 2008 peak," IATA said.

"European carriers saw the biggest weakness in demand with a fall of 11.3 percent compared to October 2008, relatively unchanged from the 13 percent drop in September," it said.

Air freight, a key barometer of the strength of world trade, tends to pick up early in the economic recovery cycle when businesses start to replenish their inventories.

Passenger demand was 6 percent better than the low point reached in March 2009, but remained 5 percent below the peak recorded in early 2008, IATA said.

"Stripping out seasonal fluctuations, passenger capacity has been essentially flat throughout 2009 ... Yields remain under severe pressure. Although there has been a modest rise in air fares since mid-year, it remains around 20 percent less expensive to fly in real terms today than it was a year ago."

IATA represents 230 airlines including British Airways BAY.L, Qantas (QAN.AX), United Airlines UAUA.O, Cathay Pacific (0293.HK) and Emirates [EMIRA.UL]. It forecasts the sector will lose $11 billion on a net basis this year and $4 billion in 2010. (Reporting by Catherine Bosley; Editing by David Holmes) ((Zurich newsroom +41 58 306 7336, fax 41 44 251 0476, zurich.newsroom@news.reuters.com))