International Consolidated Airlines Group (IAG) reported a resilient first-half performance as strong travel demand and cost controls partly offset higher jet fuel prices and disruption related to the Middle East conflict.
The group posted an operating profit of €1.757 billion for the first six months of 2026, down €121 million from a year earlier, with an operating margin of 10.9%. Revenue rose 1.0%, including growth of 1.9% in Q1 and 0.2% in Q2.
First-half 2026 operating profit, down €121 million from a year earlier.
CEO Luis Gallego said the group remained confident it could achieve its full-year operating-margin target of 12% to 15%. "We have delivered a robust first-half performance," he added.
We have delivered a robust first-half performance.
Fuel costs and Middle East disruption
Fuel unit costs increased 12.5% during the first half, and IAG recorded €769 million in hedging gains. Gallego said the group recovered about 60% of the increase in fuel costs through pricing and cost actions, although conditions differed between long-haul and short-haul markets.
CFO José Antonio Barrionuevo said the Middle East conflict had an immediate effect on capacity and fuel costs, limiting the company's ability to respond quickly. As a result, second-quarter operating profit declined by €274 million year-over-year to €1.406 billion, with the margin falling to 15.8% from 19.0%.
In Q2, passenger revenue increased by €318 million excluding foreign-exchange effects, while fuel costs increased by €489 million at constant currency. The group said it was around 70% hedged for the balance of 2026 and approximately 40% hedged for 2027.
First-half 2026 increase in fuel unit costs, partly offset by hedging gains.
Airline performance
British Airways increased its operating profit by €44 million year-over-year in the first half, generating £885 million on a reported basis and lifting its margin to 11.9%. Management cited strong premium and corporate demand, particularly across the North Atlantic network, as a driver for British Airways.
IAG Loyalty's operating profit rose £48 million to £239 million, with its margin reaching 19.3%, up 3.4 percentage points. Gallego said Avios issuance increased 15% and active members rose 9%, supported by new partnerships including bp pulse and Uber Eats in the U.K. and Cinesa in Spain.
Iberia reported operating profit of €526 million, down €38 million, while maintaining a 13.5% margin. The Spanish carrier saw strong demand in Latin America, but higher fuel costs and engine-maintenance-related cancellations affected its results.
Vueling's operating profit declined €49 million to €46 million amid fuel inflation and competitive pressure in European short-haul markets. Aer Lingus posted an operating loss of €34 million in the first half, compared with an €80 million profit a year earlier, a reversal management attributed to higher fuel costs and competitor capacity growth, particularly from U.S. airlines.
Capacity and outlook
IAG now expects full-year capacity to be flat, compared with earlier guidance for growth of about 1%. Gallego said the flat outlook reflects the cancellation of a substantial portion of Middle East operations, alongside decisions to remove inefficient capacity and preserve margins.
The group plans to resume Doha flights on Sept. 1, followed by Riyadh, Dubai and Tel Aviv from Oct. 1, subject to developments in the region. British Airways has redeployed some capacity to markets including India, Nairobi and Johannesburg.
Aer Lingus is implementing a transformation plan after its first half-year loss outside the COVID period in some time. The airline has reduced its network by 6% and removed more than 25% of senior-management positions so far. It is consulting unions on further head-office reductions and plans to invest in premium-economy and business-class products.
Management said Aer Lingus aims to reach the group's 12% operating-margin threshold, though it does not expect an immediate turnaround. A lower cost base and potential future investment in next-generation aircraft would be important for Aer Lingus to achieve its margin target.
Financial position
IAG generated €2.905 billion in free cash flow during the first half of 2026, €808 million more than a year earlier. Net debt declined to €4.7 billion from €5.9 billion at the end of 2025, and net leverage fell to 0.6 times.
Capital expenditure totaled €1.291 billion in the first half, with full-year capex expected at about €3.4 billion. The company anticipates 16 aircraft deliveries in 2026, mostly in the fourth quarter, though one delivery previously expected in 2026 has slipped into 2027.
IAG said it had completed about €800 million of the €1.4 billion excess-cash return program announced in February. It plans to update investors on its 2026 interim dividend with third-quarter results.
Gallego said the group was booked at about 57% of expected second-half revenue, in line with the prior year. IAG expects continued strong corporate demand and broadly similar unit-revenue performance to the second quarter, while maintaining its full-year margin target through revenue initiatives, cost discipline and capacity reductions.
