LONDON, May 8, 2026, 09:17 BST
International Consolidated Airlines Group SA flagged on Friday that it now expects 2026 profit, free cash flow and capacity to fall short of previous guidance, with the British Airways parent feeling the squeeze from rising jet fuel costs linked to the Middle East conflict.
Awkward timing for IAG, with peak summer travel right around the corner. The company is weighing how much capacity to put in the air, how much of the fuel price spike it can absorb, and how much to hand off to passengers. IAG now pegs its yearly fuel bill at roughly €9.0 billion and anticipates clawing back about 60% of those higher costs via ticket prices and various cost measures. Free cash flow—money left after business operations and capital investment—won’t reach the €3 billion mark promised back in February.
The caution from IAG loomed larger than its better first-quarter numbers. Revenue ticked up 1.9% to €7.18 billion, with operating profit jumping 77.3% to €351 million—strong demand and only minor early costs from the conflict played a part. The company’s operating margin improved to 4.9%.
London shares slipped out of the gate, investors shrugging off the quarterly beat and zeroing in on the weaker outlook. Alliance News pegged the stock 4.1% lower at 380.05 pence. As for JPMorgan, the bank sees full-year operating profit consensus coming in at €4.7 billion, trailing the €5.02 billion IAG delivered in 2025.
Chief Executive Luis Gallego said IAG is “actively managing the uncertainty,” adding there’s no immediate concern over fuel supplies in its key markets. The company said it’s 70% hedged through the rest of 2026, so it has contracts that cover a chunk of fuel price fluctuations. Sky News
For now, demand isn’t the sticking point. IAG pointed to solid bookings in premium cabins and robust traffic on both North and South Atlantic routes—together, those routes account for roughly half its capacity. Business travel is still climbing. But the group did warn about yield pressure at Aer Lingus on long-haul operations, noted softer demand in the Eastern Mediterranean, and flagged that Europe’s short-haul market remains fiercely competitive.
IAG is shuffling its fleet as well. Roughly 3% of its capacity had been tied to the Gulf before the conflict, mostly via British Airways. The group said much of that has now shifted to other routes—think Bangkok, Singapore, Male—while Iberia and Vueling have moved planes previously flying to Tel Aviv onto domestic Spanish routes.
IAG isn’t feeling the squeeze in isolation. According to Reuters, the company has joined Air France-KLM and easyJet in warning about the impact of rising fuel prices, though IAG’s transatlantic routes have offered some cushion. J.P. Morgan’s Harry Gowers commented the ongoing conflict will challenge IAG’s resilience, but he expects robust free cash flow to hold up.
Still, fuel disruption remains a real risk. IAG flagged that curbs on crude and jet fuel out of the Middle East have the potential to squeeze global jet fuel supply. The company, however, expects its main-market services to steer clear of shortages through the summer.
IAG is holding the line with its balance sheet and dialing back its outlook for now. As of March, net debt was €4.18 billion, with net leverage at 0.5 times. Total liquidity stood at €12.73 billion. The group says it’s still on course to complete the final €1 billion excess cash return by the end of February 2027.
