LONDON, May 13, 2026, 13:03 BST
International Consolidated Airlines Group SA shares fell in London on Wednesday as investors weighed the British Airways owner’s near-total buyback of a 2028 convertible bond against a fuel shock that has cut across its 2026 outlook. The stock was down 1.46% at 391.70 pence in delayed midday trade.
The timing is the point. IAG is trying to keep its balance sheet tidy and shareholder returns moving while a sharp rise in jet fuel costs forces it to trim profit, capacity and free cash flow expectations.
IAG said in its first-quarter update that fuel costs, based on the May 5 curve and including hedging and sustainability costs, would be about €9.0 billion this year. It said it was 70% hedged for the rest of the year, expected to recover around 60% of the higher fuel cost through revenue and cost actions, and remained on track to return a further €1 billion of excess cash by February 2027. Chief Executive Luis Gallego said the group was “taking the necessary action on yields, costs and capacity.” IAIR Group
A filing Tuesday showed IAG had accepted €821.7 million in principal amount of its €825 million 1.125% senior unsecured convertible bonds due 2028, or 99.6% of the bonds outstanding. The final repurchase price was set at €145,685.11 per €100,000 of principal, with settlement expected around May 19 and only €3.3 million left to be redeemed.
A convertible bond is debt that can turn into shares under set terms. Buying it back can reduce future dilution and simplify the debt stack; it also uses cash, which is why the timing draws attention now.
The shares had already lost 2.98% on Tuesday, underperforming a FTSE 100 index that slipped 0.04%. MarketWatch said volume was 45.7 million shares, well above the 50-day average of 27.2 million.
IAG is not alone. Reuters reported last week that Air France-KLM and easyJet were among carriers also flagging pressure from higher fuel costs. J.P. Morgan analyst Harry Gowers wrote that the conflict should test “the resiliency of the group,” while leaving IAG’s free cash flow generation intact. Reuters
But the downside case is plain. The U.S. Energy Information Administration now assumes the Strait of Hormuz will stay effectively closed through the end of May, Reuters reported, and said Brent could average about $106 a barrel in May and June. If the strait stays shut through June, the EIA said prices could be about $20 a barrel higher than current forecasts.
Event-contract markets tell a similar story. Polymarket traders put the chance of Strait of Hormuz traffic returning to normal by July 31 at 44%, while Kalshi’s WTI crude contracts showed 54% odds of a Friday settlement at $102 or above. These prices are often read as implied probabilities, not forecasts.
The business still has buffers. IAG reported first-quarter revenue of €7.18 billion and profit after tax of €301 million, while saying demand remained robust and 80% of second-quarter revenue was already booked.
Interactive Investor’s Keith Bowman wrote that fuel disruption would increase IAG’s annual bill and that investors should not forget risks such as air traffic controller strikes, weather and transatlantic trade tensions. He also pointed to the group’s brand mix, falling net debt and more efficient fleet as offsets.
For IAG stock, the bond buyback removes one small overhang. It does not remove the bigger one. The test now is whether fares, route shifts and hedges can move fast enough to protect margins before summer demand does the usual heavy lifting.
