IAG Trims 2026 Capacity Slightly Below 2025, Sees Fuel Costs at 8.9 Billion Euros
Key Facts
International Airlines Group expects full-year 2026 capacity to be slightly lower than in 2025, while maintaining its target for an operating margin of at least 12%, according to its nine-month results statement published on 6 November. The group attributed the adjustment to the absence of Middle East capacity, operational disruption so far and capacity management during the less active winter season. In the third quarter, the operating margin before exceptional items was 17.7%, despite a sharp rise in jet fuel prices. Chief Executive Luis Gallego said strong unit revenue performance across markets reflected "continued robust customer demand for travel across our airline brands." The capacity guidance comes as group revenue rose while operating profit declined from a year earlier.
In the nine months ended 30 September, revenue rose 2.3% to 25.808 billion euros, but operating profit before exceptional items fell 11.4% to 3.483 billion euros. The operating margin for the period fell to 13.5% from 15.6% in the corresponding nine months of 2025. The divergence shows that revenue growth did not prevent profitability from narrowing during the period, amid higher operating costs. For full-year 2025, the operating margin before exceptional items was 15.1%, up 1.3 percentage points from 2024. That result was at the upper end of the medium-term target margin range of 12% to 15%.
Total fuel costs in the third quarter rose 30.4% after the impact of hedging, the company reported, while non-fuel unit costs increased 3.4%. IAG said non-fuel unit costs were affected by operational disruption during the quarter, including major air traffic control outages. The group expects fuel costs of 8.9 billion euros for 2026, based on the jet fuel curve and exchange rates on 3 November. It also said it had hedged 45% of its 2027 fuel requirements. These estimates highlight the continued exposure of costs to fuel price volatility, while operational disruption remains an additional expense factor.
Network performance varied by region in the third quarter. In the North Atlantic, passenger revenue per unit of capacity rose 11.0%, while capacity increased just 0.2%, remaining almost flat. In Europe, IAG cut capacity 1.2% to protect profitability in a market it described as more challenging amid capacity growth by competitors. In Africa, the Middle East and South Asia, capacity fell 19.0% as flights to many Gulf destinations were suspended, while unit revenue in the region rose 13.2%. This reflects a divergence between declining capacity in the region and resilient unit revenue, while the company linked the absence of Middle East capacity to its full-year outlook.
IAG said 85% of expected forward bookings for the fourth quarter were secured, and bookings for the first quarter of 2027 were strong. In its investment outlook, the group cut expected capital expenditure for 2026 to 3.1 billion euros and estimated it would take delivery of 12 aircraft during the year, down from the 16 it had expected at its half-year results. It attributed the lower delivery number to delays in the arrival of three Boeing 737 aircraft for Vueling and one Airbus A321neo for British Airways. On shareholder returns, the group's board announced on 5 November an interim dividend totaling 0.053 euros per share; payment begins on 7 December, following the ex-dividend date on 3 December and the record date on 4 December. The company also began the final 500 million euro tranche of its 1.5 billion euro share buyback programme, which is due to be completed by the end of February 2027.