Aer Lingus and British Airways owner IAG has today reported better than expected annual profit, helped by lower fuel costs and demand strength on core transatlantic routes and in premium cabins.
European airlines have been buoyed by premium demand across the North Atlantic, a sector-wide trend in which affluent travellers continue to spend even as US demand for economy fares has softened.
IAG has been a European leader in recent years thanks to strengthened transatlantic links in North and South America. However, price-sensitive travellers have pulled back against a backdrop of tariff-related uncertainty and shifting US demand signals.
The group warned in November of weakness in the economy segment of the transatlantic market, sending its share price lower.
"Since Q3 we have seen a rebound," chief executive Luis Gallego told a media call, adding that premium and corporate demand were performing particularly well at British Airways and that bookings for the first quarter of 2026 were strong.
The shares have since recovered, but IAG has lost top spot for share-price growth to Air France-KLM, shares in which have jumped by 50% in the past year. IAG shares are up 36% over the same period.
Other European carriers are also benefiting from robust demand at the top end of the market, with Lufthansa rolling out new premium seats and Air France-KLM enhancing premium products through upgraded cabins, lounges and onboard services.
IAG reported operating profit before exceptional items of €5.02 billion, slightly ahead of the €4.97 billion forecast by analysts polled by LSEG and up 13% year on year.
The company said that it would return €1.5 billion to shareholders over the next 12 months, starting with a €500m share buyback to be completed by the end of May.
It added that it expected capacity growth of about 3%, with no delivery delays projected from planemakers Airbus and Boeing.
Finance chief Nicholas Cadbury told reporters there was still little visibility for the second and third quarters, explaining why the group did not provide a more detailed outlook, and there was some weakness in the Africa and Middle East region.
IAG, which also owns the Iberia, Vueling and Level airlines, said the group carried 121.6 million passengers in 2025, down 0.4% from 122 million in 2024.
For British Airways alone, passengers numbers increased by 0.4% from 46.2 million to 46.3 million.
