IAG, the owner of British Airways, reported on Friday a 15.8% fall in nine-month pre-tax profit to €3,045m from €3,615m a year earlier, as fuel costs and emissions charges rose 18.6% to €6.4bn.
Profit before tax before exceptional items (one-off costs, here restructuring charges) was €3,194m, down 11.6%. Profit after tax fell 16.2% to €2,264m from €2,703m.
The group said the fuel increase was driven mainly by a sharp rise in average commodity prices from the end of February, linked to the conflict in the Middle East. Fuel hedging gains of €1.25bn partly offset the rise.
Third-quarter operating profit before exceptional items fell to €1,726m from €2,053m, with the operating margin at 17.7% against 22.0% a year earlier. Quarterly fuel costs rose 30.4% to €2.44bn.
Luis Gallego, chief executive, said the group had achieved that margin “despite the very high price of jet fuel and a number of one-off disruption events”.
Revenue up 4.5% in the quarter
Quarterly revenue rose 4.5% to €9,744m, with passenger revenue up 3.8%. For the nine months, revenue rose 2.3% to €25,808m, while operating margin before exceptional items was 13.5%, down from 15.6%.
Non-fuel unit costs rose 3.4% in the quarter, which IAG attributed partly to disruption including major air traffic control outages. Group capacity for the nine months fell 0.2%, against an original plan of growth of about 3%.
The North Atlantic was the strongest market, with unit revenue up 11.0% on flat capacity. British Airways raised its North Atlantic unit revenue by 12.0%. In Europe, IAG cut capacity by 1.2%, citing high competitor growth.
Flights to many Gulf destinations have stopped, and capacity in Africa, the Middle East and South Asia fell 19.0%. IAG said British Airways in particular had been affected by the challenge of redeploying aircraft and crews.
Full-year margin of at least 12% still guided
IAG said it is on track for a full-year operating margin before exceptional items of at least 12%, within its through-the-cycle target range of 12% to 15%. Gallego said the outlook for the rest of the year and the start of next was “positive”.
Total fuel cost for 2026 is expected to be €8.9bn, based on the jet fuel curve and exchange rates at 3 November. That compares with scenarios of €8.3bn to €8.6bn given at the half year. The group is 45% hedged for 2027.
Capital expenditure is now expected to be €3.1bn. IAG expects 12 aircraft deliveries in 2026, down from the 16 guided at the half year, because of delays to three Boeing 737s for Vueling and an Airbus A321neo for British Airways.
The interim dividend is €0.053 per share, up 10% from €0.048. The final €500m tranche of the €1.5bn share buyback has started and is due to complete by the end of February 2027.
Net debt fell to €4,220m from €5,948m at the end of 2025, a leverage ratio of 0.6 times against 0.8.
First-half pre-tax profit fell 18.8% to €1,417m
In the first half, IAG reported a pre-tax profit of €1,417m, down 18.8%, and fuel costs of €3,956m, up 12.3%.
It said then that its airlines had all seen an adverse impact from higher fuel prices from March onwards, and that it expected to recover around 60% of the higher fuel cost through revenue and cost actions.
By airline, nine-month operating profit at British Airways was £1,493m against £1,637m a year earlier. Aer Lingus fell to €108m from €250m and Vueling to €303m from €367m. IAG Loyalty rose to £391m from £332m, and its third-quarter profit rose 8% to £152m.
IAG said heightened competition on European short-haul routes hit Vueling and competition on North Atlantic routes from Dublin hit Aer Lingus. It said 85% of expected fourth-quarter forward bookings are secured.
