International Airlines Group (IAG) expects its full-year 2026 capacity to fall slightly below 2025 levels as the loss of Middle East capacity and operational disruptions weigh on its operations, despite maintaining its operating margin target of at least 12%.
The owner of British Airways and Iberia made the projection after reporting third-quarter revenue of €9.74 billion, representing a 4.5% increase year on year. However, operating profit before exceptional items declined to €1.73 billion from €2.05 billion, resulting in an operating margin of 17.7%.
IAG’s shares rose more than 1% in London trading on Friday.
The airline group faced significant cost pressures during the quarter, with total fuel costs increasing by 30.4%, net of hedging, while non-fuel unit costs rose 3.4% due to operational disruptions, including major air traffic control outages.
These increases were partly offset by savings from cost-cutting initiatives and strong passenger yields across its markets, particularly on North and South Atlantic routes.
”IAG has delivered another resilient quarter. Our strong yield performance in all our markets reflects robust ongoing customer demand for travel for our airline brands,” Chief Executive Luis Gallego said.
North Atlantic unit revenue increased by 11.0%, while capacity remained largely unchanged, rising 0.2%. British Airways recorded a 12.0% increase in unit revenue in the market, alongside 2.2% capacity growth.
Iberia expanded its capacity by 11.5% through its A321XLR aircraft, with unit revenue increasing by 4.2%. In the South Atlantic, unit revenue rose 2.3% as capacity grew by 5.4%.
However, IAG reduced its European capacity by 1.2% to protect profitability, even as competitors increased capacity.
In Africa, the Middle East and South Asia, capacity declined by 19.0% following the suspension of flights to several Gulf destinations. Despite the reduction, unit revenue in the region increased by 13.2%.
For the full year, IAG expects non-fuel unit costs to increase by approximately 1%, while total fuel costs are projected at €8.9 billion.
The group also forecast capital expenditure of €3.1 billion and expects to take delivery of 12 aircraft in 2026.
Meanwhile, IAG increased its interim dividend by 10% to €0.053 per share and commenced the final €500 million tranche of its €1.5 billion share buyback programme.
Despite higher fuel costs and operational disruptions, the group maintained its operating margin target of at least 12%, supported by strong passenger demand and yield performance across its markets.
