Shares in British Airways owner IAG dropped after Heathrow Airport warned profits will fall this year as it cut its passenger outlook due to the war in the Middle East dampening global travel demand.
The UK's largest airport said costs were also rising, meaning adjusted EBITDA is expected to decline by £147 million or almost 7.4% from 2025 levels and by £60 million compared with its previous forecast issued in December. Last year, the airport generated flat earnings of £2.03 billion.
Passenger numbers rose 0.7% year-on-year to 32.8 million in the first five months of 2026, helped by larger aircraft and an increase in connecting passengers.
However, Heathrow said ongoing instability in the Middle East was putting "notable downward pressure" on traffic.
The airport now expects passenger numbers of between 80.1 million and 84.5 million this year, with a base case of 83.6 million, representing a 1.1% decline from 2025 and a cut of up to 5.8% from the 85 million passengers it previously said it expected in 2026.
Aeronautical revenue is expected to be £49 million lower than previously forecast because of the weaker traffic outlook, while operating costs are set to rise due to higher employment expenses and the full-year impact of increased business rates.
Despite the softer outlook, Heathrow said its balance sheet remained robust, with liquidity covering between 18 and 24 months and sufficient headroom under its debt covenants even in a scenario where passenger numbers fall to 69 million.
The airport is also pressing ahead with plans for a third runway, having approved new investment earlier this year to begin work on a planning application ahead of a target to secure permission by 2029.
Shares in International Consolidated Airlines Group (LSE:IAG), whose British Airways airline holds more than half the airport's slots, fell 1.5% to 480.4p in mid-morning trading.
** UPDATE: New headline and share price reaction **
