International Airlines Group, the parent company of British Airways, has revised its full-year profit expectations downward due to the impact of rising jet fuel prices, which have been driven higher by conflict stemming from the situation in Iran.
IAG, which also owns airlines such as Iberia and Vueling, stated on Friday that its total fuel costs for the year could reach 9 billion euros (approximately $10.55 billion), an increase of about 2 billion euros compared to last year.
The London-listed group has hedged 70% of its fuel requirements for the remainder of the year and does not anticipate fuel shortages in its key markets this summer. The company expects to offset approximately 60% of the incremental fuel cost increase through fare adjustments, cost control measures, and capacity management.
However, IAG acknowledged that higher fuel prices will negatively affect full-year profit and free cash flow. The company's expectations for these metrics have been lowered from previous forecasts, although specific new figures were not provided. In February, the company had projected 2026 free cash flow to exceed 3 billion euros. Furthermore, the full-year capacity growth rate will also be lower than the previously guided 3%.
IAG Chief Executive Luis Gallego said on Friday, "We are proactively managing the uncertainty and impact of rising fuel costs by taking necessary measures related to yields, costs, and capacity." He added, "We currently assess that there is no risk to fuel supply in our main markets, a situation further secured by investments in self-sufficient fuel infrastructure at our hub airports."
Affected by rising fuel costs due to Middle East geopolitical conflict, IAG is the latest European airline group to downgrade its performance outlook. Industry peers are also implementing special measures to counter the impact: Lufthansa has cancelled some flights and grounded less fuel-efficient aircraft, while Air France-KLM has paused hiring.
Since the outbreak of regional conflict following strikes by Israel and the US on Iran in late February, IAG has redeployed some capacity from the Gulf region to other markets, increasing flight frequencies on routes to Bangkok, Singapore, and the Maldives. British Airways has added summer flights on high-demand routes such as from India and Nairobi to the US, and plans to increase frequencies later this year to winter holiday destinations like the Caribbean and Sri Lanka.
IAG stated that travel demand in its core markets remains strong, with second-quarter booked revenue already reaching 80% of expectations.
First-quarter financial data: The group reported a first-quarter net profit of 301 million euros, compared to 176 million euros in the same period last year. Revenue increased by 1.9% year-on-year to 7.18 billion euros.
Operating profit excluding one-off items, a key performance indicator for the company, surged 77% year-on-year to 351 million euros, significantly exceeding market consensus expectations of 248 million euros. The earlier timing of Easter, lower non-fuel costs, and favorable currency exchange movements collectively boosted first-quarter performance.
RBC Europe analysts Ruairi Cullinane and Jacob Glynkowski noted in a research report that IAG's relatively high profit margins provide it with greater resilience to the impact of rising fuel costs compared to some industry peers.
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