IAG navigates fuel costs and strong travel demand

Rising fuel prices create fresh headwinds

The most significant recent challenge facing IAG has been the sharp increase in jet fuel costs linked to ongoing geopolitical tensions in the Middle East.

Earlier this month, IAG warned that annual profits and free cash flow would come under pressure after forecasting its 2026 fuel bill could rise to around €9 billion, roughly €2 billion higher than previously expected.

Management stated that approximately 70% of fuel requirements remain hedged for the remainder of the year, helping partially cushion the impact of oil-price volatility. Nevertheless, higher energy costs are expected to weigh on margins across the airline sector.

To offset part of the increase, British Airways is expected to increase ticket prices, particularly on premium routes where customer demand has remained relatively resilient. Analysts estimate fare increases could average around 8% on some services.

The company has also adjusted capacity allocation away from weaker demand regions in the Middle East towards stronger-performing North Atlantic and European routes.