International Consolidated Airlines Group SA (LSE:IAG), the owner of British Airways, Iberia, Aer Lingus and Vueling, has warned that the Middle East conflict will push annual profits below its earlier forecasts, even as it reported a 77.3% surge in first-quarter operating profit to €351 million.
The group said it expects to recover around 60% of its higher fuel bill through pricing and cost measures, but acknowledged that the remaining impact will drag on earnings throughout the rest of the year.
On supply, IAG said it is confident of securing adequate jet fuel across its main hubs through the summer, citing self-supply infrastructure at its airports and existing inventory levels.
It warned, however, that a prolonged closure of the Strait of Hormuz could restrict global jet fuel availability more broadly, and said it was engaging with governments in its home markets and with the European Union to ensure industry support.
The group is 70% hedged on fuel for the remainder of the year, a position that shielded it from the worst of the price spike in the first quarter, when spot prices roughly doubled in a single month to around $1,725 per metric tonne by end of March.
Based on the fuel curve as of 5 May 2026, IAG now expects its full-year fuel bill to reach approximately €9 billion.
Revenue for the three months to 31 March rose 1.9% to €7.18 billion, driven by strong demand in premium cabins and on transatlantic routes, which together account for around half of the group's capacity.
Capacity grew by just 0.2%, well below the 2% originally planned, after the group suspended flights to destinations including Dubai, Doha, Abu Dhabi, Bahrain, Amman and Tel Aviv following the escalation of fighting from late February.
Around 3% of IAG's network was exposed to the Gulf region before the conflict. Redeployed aircraft have added capacity to routes including Bangkok, Singapore, the Maldives, India and Nairobi.
Aer Lingus was the weakest performer, deepening its operating loss to €103 million from €55 million a year earlier, reflecting competition on North Atlantic routes and additional fuel costs.
IAG said it remains on track to return the remaining €1 billion of excess cash to shareholders by the end of February 2027.
Chief executive Luis Gallego said the group's diverse markets, strong brands and balance sheet positioned it well to navigate current headwinds, adding that the situation today was more a question of fuel price than fuel availability.
Net debt fell to €4.18 billion from €5.95 billion at the end of December 2025, with total liquidity of €12.73 billion.