International Consolidated Airlines Group (IAG), the parent company of British Airways, reported a 19% decline in pre-tax profits for the first half of 2026, attributed largely to soaring fuel costs linked to the ongoing conflict in the Middle East. The company posted a pre-tax profit of €1.4 billion, down from €1.7 billion in the same period last year, despite stable revenue of €16.1 billion, which increased by 1%.
Rising Fuel Costs
IAG's fuel and emissions charges surged by €413 million, marking a 23% increase due to the geopolitical situation. Operating profit for the second quarter alone fell 25% to €1.3 billion. Chief Executive Luis Gallego noted that the company managed to recover about 60% of the increased fuel expenses through higher revenue and cost-saving measures. Non-fuel costs per available seat kilometer decreased by 1.3% during the half.
Future Outlook
IAG has indicated that it expects capacity to remain flat for the remainder of 2026, having flown fewer services than initially planned. Approximately 57% of seats for the second half of the year have already been booked, with revenue from those bookings aligning with the previous year. Gallego emphasized that IAG's diverse portfolio of airline brands positions it well to navigate these near-term challenges.
Related coverage: Indian Stocks Decline as Oil Prices Surge Past $100.
The rise in fuel costs is likely to exert pressure on airlines' operating margins, particularly affecting short-haul routes where competition remains intense. Investors will watch for IAG's performance in the upcoming months as the company navigates these challenges and seeks to maintain its operating margin target of 12% to 15%.
Watch for IAG's next earnings report, expected later this year, which will provide further insights into the company's financial health amid ongoing geopolitical tensions.