IAG Beats Profit Forecasts but Shares Slide on Cautious Outlook

International Airlines Group, the parent company of British Airways, reported annual profits ahead of market expectations, driven by lower fuel costs and strong demand for premium transatlantic travel. However, its shares fell sharply as investors reacted to a cautious outlook and limited visibility for the year ahead.

The group posted an operating profit before exceptional items of 5.02 billion euros, up 13 percent year on year and slightly above analyst forecasts of 4.97 billion euros. The performance reflects sustained strength on North Atlantic routes, particularly in premium cabins and corporate travel, which have remained resilient despite broader economic uncertainty.

Chief executive Luis Gallego said demand in premium and business segments at British Airways was performing well and that bookings for the first quarter of 2026 were strong. He also noted that after signs of weakness in the economy segment during the third quarter, there had been a rebound in recent months.

Despite the upbeat earnings report, IAG shares were down around 6 percent in late morning trading in London. Analysts pointed to the absence of detailed profit guidance for 2026 and concerns about potential volatility in fuel prices. Finance chief Nicholas Cadbury said there was still limited visibility for the second and third quarters, which made it difficult to provide a more specific outlook.

European airlines have broadly benefited from robust premium travel across the North Atlantic, where affluent leisure passengers and corporate clients continue to spend. However, demand for lower priced economy tickets has shown signs of softness, particularly amid tariff related uncertainty and shifting demand patterns in the United States.

IAG has strengthened its transatlantic network in recent years, building links between Europe and both North and South America. This strategy has positioned the group as one of the stronger performers in the region. Over the past year, its shares have risen around 36 percent, though rivals such as Air France KLM have posted even stronger gains.

The company also announced plans to return 1.5 billion euros to shareholders over the next 12 months, beginning with a 500 million euro share buyback to be completed by the end of May. The move signals confidence in the balance sheet and cash generation capacity, even as management remains cautious about forward guidance.

Looking ahead, IAG expects capacity growth of about 3 percent this year and said it does not anticipate delivery delays from aircraft manufacturers Airbus and Boeing. However, the group acknowledged some regional weakness, particularly in Africa and the Middle East.

With premium demand holding firm but economic uncertainty lingering, investors appear to be weighing IAG’s strong recent performance against the risks of fuel price swings and shifting travel trends in key markets.