LONDON, May 13, 2026, 13:03 BST
Shares of International Consolidated Airlines Group SA slipped in London on Wednesday, with investors digesting the British Airways parent’s aggressive repurchase of a 2028 convertible bond while factoring in a fuel price hit to its 2026 forecast. The stock traded 1.46% lower at 391.70 pence in delayed midday action.
Timing is everything here. IAG wants to keep its balance sheet looking sharp and keep those shareholder payouts coming, but a spike in jet fuel prices is pushing the group to cut back on profit targets, capacity, and free cash flow guidance.
IAG reported in its first-quarter update that fuel costs for the year are tracking at about €9.0 billion—figures based on the May 5 curve, with hedging and sustainability factored in. The company is 70% hedged for the rest of the year and expects to offset roughly 60% of those extra fuel expenses through a mix of revenue boosts and cost cuts. A further €1 billion in surplus cash is still slated for return by February 2027. “We’re taking the necessary action on yields, costs and capacity,” Chief Executive Luis Gallego said. IAIR Group
IAG on Tuesday disclosed it took in €821.7 million of the €825 million 1.125% senior unsecured convertible bonds due 2028—amounting to 99.6% of the notes out. The final repurchase price: €145,685.11 per €100,000 principal. Settlement’s anticipated near May 19, leaving just €3.3 million in bonds still up for redemption.
A convertible bond is a type of debt that, on certain terms, flips into equity. Repurchasing one trims potential dilution and streamlines liabilities, though it consumes cash—hence the focus on timing right now.
Shares dropped 2.98% on Tuesday, lagging behind the FTSE 100’s slight 0.04% decline. MarketWatch reported trading volume at 45.7 million shares—far surpassing the 50-day average of 27.2 million.
IAG isn’t the only airline feeling the squeeze. According to Reuters, both Air France-KLM and easyJet recently warned about the impact of rising fuel prices. J.P. Morgan’s Harry Gowers sees the conflict as a real test for “the resiliency of the group,” though he expects IAG’s ability to generate free cash flow will hold steady. Reuters
The downside’s straightforward. The U.S. Energy Information Administration expects the Strait of Hormuz to remain shut until at least the end of May, according to Reuters, and projects Brent crude averaging around $106 a barrel for May and June. Should the closure drag into June, the EIA estimates prices could land roughly $20 a barrel above current projections.
Event-contract markets are drawing a parallel picture. On Polymarket, traders saw just a 44% likelihood that Strait of Hormuz traffic would get back to normal by July 31. Kalshi’s WTI crude contracts, meanwhile, priced in a 54% probability of the commodity settling at $102 or higher this Friday. Those figures reflect implied odds, not actual predictions.
IAG still has some cushion. For the first quarter, the company posted €7.18 billion in revenue and €301 million in after-tax profit, noting strong demand and that 80% of second-quarter revenue had already been locked in.
Keith Bowman at Interactive Investor flagged that fuel disruption stands to push up IAG’s yearly costs. He reminded investors about ongoing risks—strikes by air traffic controllers, volatile weather, and tensions over transatlantic trade. Still, Bowman noted positives: IAG’s diverse brand portfolio, its declining net debt, plus a more efficient fleet to help offset those pressures.
IAG’s bond buyback clears away a minor obstacle for the stock, but the main challenge remains. The real question is if adjustments in fares, routes, and hedging can shore up margins quickly, before the usual summer traffic boost takes over.
