LONDON, May 14, 2026, 16:02 BST
International Consolidated Airlines Group SA agreed to buy back €821.7 million in 2028 convertible bonds, effectively retiring 99.6% of the issue. The British Airways parent is looking to streamline its balance sheet as fuel prices pressure the industry. Bondholders will be paid €145,685.11 per €100,000 principal, with settlement slated for about May 19.
Timing is critical here. Just days ago, IAG flagged that its 2026 profit, capacity, and free cash flow—money left after covering operations and investment—will land below previous targets. The culprit: jet-fuel prices and supply snags tied to the Iran war have cut deeper than IAG anticipated.
A convertible bond lets debt morph into equity. Repurchasing this kind of bond may ease shareholder dilution risk, but it leaves IAG facing its core challenge: figuring out just how much of the fuel price hit it can shift onto ticket buyers before demand starts to soften.
IAG was trading 1.0% lower at 387.20 pence as of 15:47 BST, according to delayed figures from Lloyds Bank. The shares had started the session at 394.30 pence. Volatility has persisted in the wake of the profit warning, even with the recent debt action.
This isn’t a company scrambling at the starting line. Morningstar’s Loredana Muharremi, in a May 13 note, pointed out IAG delivered a first-quarter operating profit of €351 million on a 4.9% margin. Revenue ticked up 1.9%. Net leverage—calculated at 0.5 times EBITDA—fell, too. The analyst described IAG shares as “moderately undervalued,” and argued the company faces the fuel crunch from “a position of strength.” Morningstar
Luis Gallego, the chief executive, has emphasized keeping things under control rather than sounding alarmed. “No issues with fuel availability” in IAG’s core markets, he said. J.P. Morgan’s Harry Gowers, per Reuters, pointed to “strong free cash flow generation” holding steady. Reuters
But airlines are adjusting their schedules. British Airways is set to reduce Middle East flights once operations restart, with Jeddah off the map for good, and it’s shifting focus to bump up service to India and Africa. Iberia Express, for its part, won’t fly to Tel Aviv until at least May 31, Reuters reports via Investing.com. The shakeup’s also hitting Air France-KLM, Lufthansa Group, and Wizz Air, though each carrier sees a different level of disruption depending on their network and hedges.
The bond cleanup doesn’t eliminate the core issue here: if the Gulf shipping snarl drags on, jet fuel prices could stay high right through the busy summer stretch. IAG faces tough choices—push ticket prices higher, take a hit on margins, or slow down growth plans. Prediction markets aren’t forecasts but do signal trader sentiment; on Polymarket, odds for Strait of Hormuz traffic returning to normal by July 31 stood at 46%. Kalshi, earlier this month, had normal traffic before August at 44%.
The next focus shifts from the debt line to bookings. With its premium and transatlantic footprint, IAG has a bit more pricing power than rivals focusing on short-haul routes. Yet, competition is heavier on European leisure flights, and travelers on those routes usually respond quickly when fares go up.
IAG owns British Airways, Iberia, Vueling, Aer Lingus, LEVEL, IAG Loyalty, and IAG Cargo. The group is registered in Spain, listed in both London and Madrid, with its main corporate office based in London.
