LONDON, May 8, 2026, 09:17 BST
International Consolidated Airlines Group SA warned on Friday that 2026 profit, free cash flow and capacity would come in below earlier forecasts, as higher jet fuel costs tied to the Middle East conflict start to bear down on the British Airways owner.
The timing is awkward. Peak summer flying is near, and IAG is having to decide how much capacity to run, how much fuel inflation to absorb and how much to pass to customers. The group now sees its annual fuel bill at about €9.0 billion, expects to recover roughly 60% of the higher cost through fares and cost action, and says free cash flow — cash left after running the business and capital spending — will fall short of the €3 billion guided in February.
The warning overshadowed a stronger first quarter. IAG said revenue rose 1.9% to €7.18 billion and operating profit increased 77.3% to €351 million, helped by firm demand and a limited early cost hit from the conflict. Its operating margin rose to 4.9%.
Shares fell in early London trading as investors focused on the lowered outlook rather than the quarterly beat. Alliance News reported the stock down 4.1% at 380.05 pence, while it said JPMorgan put current full-year operating profit consensus at €4.7 billion, below the €5.02 billion IAG posted in 2025.
Chief Executive Luis Gallego said IAG was “actively managing the uncertainty” and saw no current issue with fuel availability in its main markets. The group said it was 70% hedged for the rest of 2026, meaning it has contracts in place to cushion part of the fuel price swing. Sky News
Demand is not the main problem, at least not yet. IAG said premium cabins and the North and South Atlantic routes remained strong, together making up about half of capacity, while business travel continued to grow. It also flagged long-haul yield pressure at Aer Lingus, softer Eastern Mediterranean demand and a still-competitive short-haul European market.
The airline group is also moving aircraft around. About 3% of capacity had been exposed to the Gulf region before the conflict, mainly at British Airways, and IAG said a large part of that network had been redeployed to routes including Bangkok, Singapore and Male, with Iberia and Vueling reallocating Tel Aviv capacity to domestic Spain.
The pressure is not IAG’s alone. Reuters reported that the group had joined Air France-KLM and easyJet in flagging a hit from spiralling fuel costs, even as IAG’s transatlantic business has remained a relative support. J.P. Morgan analyst Harry Gowers wrote that the conflict would test the group’s resilience, but that strong free cash flow generation should remain intact.
But the risk is that fuel disruption drags on. IAG said restrictions on crude and jet fuel flows from the Middle East could tighten global jet fuel supply, even though it expects its own main-market services to avoid fuel shortages through the summer.
For now, IAG is leaning on its balance sheet while trimming expectations. It ended March with net debt of €4.18 billion, net leverage of 0.5 times and total liquidity of €12.73 billion, and said it remained on track to continue the remaining €1 billion return of excess cash through the end of February 2027.
