International Airlines Group said third-quarter pre-tax profit fell 12.9 per cent to €1.63bn in the three months to 30 September, as a 30.4 per cent rise in jet fuel costs and other headwinds squeezed margins.
Revenue rose 4.5 per cent to €9.7bn, but that was not enough to offset the higher costs, the London-listed owner of British Airways said, with operating profit down 15.9 per cent to €1.73bn.
Fuel spike trims profits despite stronger demand
IAG said jet fuel costs jumped 30.4 per cent in the quarter, an increase of €570m (£471.9m). The group linked the rise to the closure of the Strait of Hormuz after the outbreak of war in the Middle East.
For the nine months to September, pre-tax profit fell 16 per cent to €3bn, while fuel costs including emissions charges rose 19 per cent to €6.4bn. IAG now expects full-year fuel costs of €8.9bn (£7.28bn), the company said.
The group said it had hedged about 70 per cent of its fuel needs for the current financial year but only 45 per cent for 2027, leaving it more exposed to spot prices as hedges roll off. IAG said the lower level of cover for 2027 increases its sensitivity to any further rises in oil and refined jet fuel prices.
Chief executive Luis Gallego said the group faces the “very high price of jet fuel” but that demand is “robust” and that the outlook for the rest of the year and the start of next year is “positive”, according to the company.
British Airways, which is part of IAG alongside Iberia, Vueling and Aer Lingus, aims to pass through close to 100 per cent of higher fuel costs over the full year, the group said. The company declined to provide detailed guidance on how much fares will rise as a result.
Air traffic control failure adds to bill
IAG also booked €25m to €30m (£20.5m to £24.6m) of costs related to the National Air Traffic Services failure on 8 September. The group said the outage affected about 500 IAG flights and 85,000 customers.
Those costs were recorded in the quarter and reflect compensation, rebooking and other disruption-related expenses, the company said. IAG said the NATS incident added to the quarter’s pressure on profits but did not alter the group’s longer term expectations for demand.
The carrier raised its dividend by 10 per cent to €0.053 a share, the group added.
The results follow a warning from a rival carrier earlier in the week that higher fuel costs could force changes across the industry, including pay freezes and the use of new technologies to control costs. IAG said its own strategy combines hedging, capacity management and selective pricing to manage the impact of higher input costs.
Despite the hit to profits, IAG said demand remained strong across its networks. The company pointed to resilient passenger volumes and continued recovery in international travel as supporting revenue growth in the quarter, even as unit costs were affected by the sharp fuel increase.
Analysts will now be watching how quickly the group can translate higher costs into ticket prices without denting demand. IAG said it aims to recover most of the fuel impact over the full year but declined to spell out the level of fare increases or the timing of moves for 2027 pricing.
With only about 45 per cent of next year's fuel needs hedged, the group will remain sensitive to further volatility in oil and refined fuel markets. IAG said it continues to monitor the market closely and adjust its commercial and operational plans as conditions change.
The company reiterated that, while fuel is an important headwind, it is one of several factors shaping performance, including labour, airport charges and the legislative environment for emissions. For now, IAG said it remains cautious but constructive on the trading outlook for the remainder of the year and into early 2027.
