Aer Lingus and British Airways owner IAG’s annual profit will be lower than forecast, it warned today, saying that soaring jet fuel costs and supply disruptions driven by the Iran war will weigh more heavily on earnings than previously expected.
Shares in IAG were down almost 3% this morning, making it one of the biggest losers on the FTSE 100 index.
IAG shares have been among the top performers in the airline sector in recent years thanks to IAG’s resilience in the transatlantic market. That resilience remains in place, chief executive Luis Gallego said today on a media call.
The company said that free cash flow and capacity would be lower than previously projected, joining Air France-KLM, EasyJet and others in flagging a hit tied to spiralling fuel costs.
IAG, which also owns Iberia and Aer Lingus, expects jet fuel costs to be about €9 billion this year, with 70% of its anticipated fuel needs hedged for the remainder of 2026.
“We are actively managing the uncertainty created by the fuel price increase and its impact, taking the necessary action on yields, costs and capacity. We currently see no issues with fuel availability in our main markets,” Gallego said in a statement.
He added on a media call that the company expects this year’s jet fuel costs to be about €2 billion higher than in 2025. IAG had previously said its airlines would have to charge higher fares to offset the rising cost of fuel.
The company did not give specific projections for annual profit today but said that “capacity will be lower than the 3% increase guided at full-year results”.
Free cash flow would also be lower than the previously projected €3 billion, its statement said.
However, Gallego said the company was not concerned about fuel supply.
“We have been planning for situations like this for many years. We have invested, a long time ago, in our own supply, our own fuel, our own inventory,” he told reporters.
IAG beat profit expectations when it reported full-year results in February, but its shares dropped on uncertainty over its 2026 guidance.
Though the share price fell today, analysts remained upbeat on the group’s outlook.
“We expect the current conflict will prove the resiliency of the group and the strong free cash flow generation to remain intact,” J.P. Morgan analyst Harry Gowers said in a note.
