British Airways owner sends fuel warning
Key Points
- IAG warns 2026 profit will fall below earlier expectations after Middle East conflict pushed jet fuel prices higher.
- Group fuel cost forecast at €9.0 billion, with only 60% of the increase recoverable through fares and cost actions.
- British Airways suspended Gulf routes, redeployed capacity to India, Singapore, Bangkok, Maldives and Nairobi.
- Q1 operating profit jumped 77.3% to €351 million on 1.9% revenue growth and a 1.5-point load factor rise.
- Capacity guidance cut to roughly 1% in Q2 and 2% in Q3, free cash flow now expected below €3 billion.
British Airways parent IAG warned on Friday (8 May) that profits this year will fall short of earlier expectations after the Middle East conflict drove jet fuel prices sharply higher, even as the group reported a 77.3% jump in first-quarter operating profit to €351 million.
Chief Executive Luis Gallego told investors the group expects fuel costs of around €9 billion for 2026 based on the fuel curve as at 5 May, with IAG 70% hedged for the rest of the year.
The group expects to recover only around 60% of the higher fuel cost through revenue and cost actions, meaning UK passengers face firmer fares on British Airways routes through the summer and into the winter season.
Spot jet fuel hit roughly $1,725 per metric tonne at the end of March, double the price at the end of February, after the conflict disrupted shipping and oil exports through the Strait of Hormuz.
IAG said around 60% of its fuel consumption is priced on the prior month’s reference period, meaning the steepest cost impact lands in April onwards rather than the first quarter.
Gallego said the group sees no current issues with fuel availability in its main markets, helped by self-supply arrangements at its hubs, but warned that sustained restrictions on Middle East crude and jet fuel flows could constrain global supply.
IAG is engaging with the UK government, the Spanish and Irish governments and the EU on industry support.
For UK travellers, there have already been several key route changes made.
British Airways suspended flights to Abu Dhabi, Bahrain, Doha, Dubai and Tel Aviv from late February, with Jeddah following on 24 April.
The airline has redeployed capacity to Singapore, Bangkok and the Maldives, added frequencies to Bangalore, Delhi and Mumbai, upgauged Hyderabad services, and doubled Nairobi to two flights a day.
BA has also flagged extra winter capacity to the Caribbean and Sri Lanka as travellers shift away from Gulf sun destinations.
Group capacity guidance was cut, with IAG now expecting to grow seats by around 1% in the second quarter and 2% in the third, against earlier full-year guidance of 3%.
Free cash flow will come in below the €3 billion guided in February, and capital expenditure has been trimmed to €3.5 billion from €3.6 billion.
The remaining €1 billion of excess cash returns to shareholders remains on track through to February 2027.
First-quarter revenue rose 1.9% to €7,181 million, with passenger revenue up 3.8% to €6,226 million on a 1.5 point rise in load factor to 84.2%.
British Airways delivered an operating profit of £186 million for the quarter, up from £96 million, helped by an earlier Easter, a weaker US dollar and the absence of a repeat of last year’s Heathrow fire shutdown on 21 March 2025.
IAG Loyalty, which runs the Avios programme, grew revenue 10% with profit up 32.6% at a 20.1% margin.
Net debt fell to €4,183 million from €5,948 million at the end of December, with leverage down to 0.5 times EBITDA. Total liquidity stood at €12,731 million.
