British Airways owner International Consolidated Airlines Group SA (LSE:IAG) reported lower profits for the first half of 2026 as fuel costs rose and flights were cancelled due to the war in the Middle East.
The FTSE 100 group reported revenue of €16.1 billion for the six months to June, up 1%. Operating profit before exceptional items fell 6.4% to €1.8 billion, while adjusted earnings per share declined 10.9% to 23.6 cents.
The pressure intensified during the second quarter, with operating profit dropping 16.3% as jet fuel costs were pushed higher and capacity was cut because of the Iran war.
IAG said it recovered around 60% of the higher fuel bill through increased revenue and cost savings. Non-fuel costs per available seat kilometre fell 1.3% during the half.
The group now expects capacity to be flat in 2026 compared with last year, having flown fewer services than planned. Its latest forecast puts the annual fuel bill at between €8.3 billion and €8.6 billion.
However, IAG maintained its target for a full-year operating margin of between 12% and 15%. It said long-haul markets remained positive, although competition on short-haul routes was expected to remain intense.
Free cash flow rose to €2.9 billion from €2.1 billion, while net debt fell to €4.7 billion from €5.9 billion.
Chief executive Luis Gallego said the group was "well-positioned" to deal with what he called "near-term headwinds", pointing to its mix of airline brands, cash generation and balance-sheet strength.
"Our long-term transformation programme has created the resilience that we are now benefitting from – products and services that our customers value, efficient and punctual operations and a low cost base. Each of our businesses is very focused on continuing to execute their transformation plans to deliver further long-term benefits."
IAG shares fell 5% in early trade, before losses were trimmed to 1.1% at 433.8p.
Broker Panmure Liberum said Q2 results were "modestly ahead of consensus", with operating profit of €1.4 billion down 16% but beating the average City forecast of €1.37 billion.
"Relative to our estimates, revenue was weaker than expected but this was more than offset by a better cost performance (both fuel and non-fuel)... Fuel bill guidance looks slightly better, but management still expects to recover only 60% of the higher cost."
** UPDATE: Adds share price and broker comment **
