International Consolidated Airlines Group SA (LSE:IAG), the owner of British Airways, Iberia and Aer Lingus, has delivered record annual profits and set out a positive outlook for 2026, backed by a pledge to return €1.5 billion of excess cash to shareholders.
The carrier said it was confident of continuing to generate earnings growth at high margins in the coming year, supported by strong demand across its core markets, constrained global aircraft supply and the ongoing rollout of its transformation programme.
IAG said free cash flow after gross capital expenditure was expected to exceed €3 billion in 2026, with capacity rising by around 3% and non-fuel unit costs expected to fall by around 1%, helped by a favourable currency tailwind of approximately two percentage points.
The company will begin returning the €1.5 billion to shareholders through a €500 million share buyback to be completed by the end of May, with the remainder to follow within 12 months. It also proposed a final dividend of €0.05 per share, taking the total dividend per share for 2025 up 8.9%.
The upbeat forward guidance followed a year in which IAG posted the strongest financial results in its history.
Operating profit before exceptional items rose 13.1% to €5 billion in the year to 31 December 2025, while total revenue grew 3.5% to €33.2 billion, and the operating margin improved by 1.3 percentage points to 15.1%.
Adjusted earnings per share climbed 22.4% to 69.5 euro cents, and return on invested capital reached 18.5%, up from 17.3% in 2024.
Free cash flow came in at €3.1 billion, and net debt fell to €5.9 billion, leaving the group with net leverage of 0.8 times earnings before interest, taxes, depreciation and amortisation, well inside its target ceiling of 1.8 times.
Chief executive Luis Gallego said the results demonstrated sector-leading operational performance translating into world-class financial outcomes, with the group having now returned a total of €2.85 billion in excess cash to shareholders over the past three years.
Operational performance also improved, with on-time performance rising 4.6 percentage points to 82.4% and customer satisfaction scores increasing by 6.9 points.
IAG said it was monitoring a partial sale process by the Portuguese government of national carrier TAP, describing it as a strategically interesting opportunity but one that would only be pursued on terms that created value for shareholders.
The group also announced a partnership with Starlink to bring high-speed Wi-Fi to aircraft across its airlines, with the first British Airways-enabled service due to launch in March.