International Consolidated Airlines Group SA (LSE:IAG), the owner of British Airways, has reported a drop in first-half profits as the Iran war disrupted operations and inflated fuel costs.
The FTSE 100 group posted revenue of €16.1 billion for the six months to June 2026, representing a modest 1% increase on the prior year period.
Operating profit before exceptional items fell 6.4% to €1.8 billion, as the combination of rising fuel costs and cancelled flights weighed heavily on the group’s finances.
Adjusted earnings per share declined 10.9% to 23.6 cents, reflecting the broader operational strain placed on the business during the first half.
The pressure was most acute in the second quarter, when operating profit dropped 16.3% as jet fuel costs surged and capacity was reduced due to the Iran conflict.
IAG said it managed to recover around 60% of the higher fuel bill through a combination of increased revenue and targeted cost savings across the group.
Non-fuel costs per available seat kilometre fell 1.3% during the period, offering some relief as the group worked to offset external pressures on its cost base.
The group now expects capacity to remain flat in 2026 compared with last year, and its latest forecast puts the annual fuel bill at between €8.3 billion and €8.6 billion.
Despite the challenges, IAG maintained its target for a full-year operating margin of between 12% and 15%, with long-haul markets described as remaining positive.
Free cash flow rose to €2.9 billion from €2.1 billion, while net debt fell to €4.7 billion from €5.9 billion, signalling continued financial resilience beneath the headline profit pressure.
Chief executive Luis Gallego said the group was “well-positioned” to deal with what he called “near-term headwinds”, pointing to its mix of airline brands, cash generation and balance-sheet strength.
Gallego added: “Our long-term transformation programme has created the resilience that we are now benefitting from – products and services that our customers value, efficient and punctual operations and a low cost base.”
He said each of the group’s businesses remained “very focused on continuing to execute their transformation plans to deliver further long-term benefits”, underscoring confidence in IAG’s strategic direction.
Short-haul competition was flagged as an ongoing concern, with the group expecting intense rivalry on European routes to continue throughout the remainder of 2026.