International Consolidated Airlines Group SA (LSE:IAG), the owner of British Airways, Iberia, Aer Lingus and Vueling, fell 5% to 377p after warning that the Middle East conflict will push annual profits below earlier forecasts, despite a 77.3% surge in first-quarter operating profit to €351 million.
The group expects its full-year fuel bill to reach approximately €9 billion, up from €7.1 billion previously, based on the price curve as of 5 May, and said it will recover around 60% of the additional cost through pricing, capacity reallocation and cost controls.
IAG is 70% hedged for the remainder of the year and said it is confident of adequate jet fuel supplies through the summer, though it cautioned that a prolonged Strait of Hormuz closure could restrict availability globally.
Revenue for the three months to 31 March rose 1.9% to €7.18 billion, while capacity grew just 0.2% after the group suspended flights to Gulf destinations including Dubai, Doha and Tel Aviv.
Net debt fell to €4.18 billion, with liquidity of €12.73 billion.
IAG said it remains on track to return €1 billion of excess cash to shareholders by February 2027.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said IAG was much better positioned than most peers to navigate current challenges, citing its tilt toward premium passengers and structurally higher margins.
He noted that only around 3% of the group's capacity was exposed to the Gulf region before the conflict, much of which has already been redeployed to routes such as Bangkok and Singapore, where Middle Eastern carriers have reduced flying.
"The balance sheet remains in great shape," Chiekrie added, "and it still has the confidence to continue with the remaining €1 billion of its €1.5 billion share buyback programme this year."