British Airways owner IAG warns on profit and capacity as fuel prices soar
IAG Faces Financial Pressure Amid Rising Fuel Costs
By Yamini Kalia and Joanna Plucinska
Profit Warning and Contributing Factors
May 8 (Reuters) - British Airways owner IAG's annual profit will be lower than forecast, it warned on Friday, saying that soaring jet fuel costs and supply disruptions driven by the Iran war will weigh more heavily on earnings than previously expected.
The company said that free cash flow and capacity would be lower than previously projected, joining Air France-KLM, easyJet and others in flagging a hit tied to spiralling fuel costs.
Fuel Costs and Hedging Strategy
IAG, which also owns Iberia and Aer Lingus, expects jet fuel costs to be about 9 billion euros ($10.56 billion) this year, with 70% of its anticipated fuel needs hedged for the remainder of 2026.
Management Response and Market Impact
“We are actively managing the uncertainty created by the fuel price increase and its impact, taking the necessary action on yields, costs and capacity. We currently see no issues with fuel availability in our main markets," Chief Executive Luis Gallego said in a statement.
The company did not give specific projections for annual profit on Friday but said that "capacity will be lower than the 3% increase guided at full-year results".
Free cash flow would also be lower than the previously projected 3 billion euros, its statement said.
Recent Performance and Market Reaction
IAG beat profit expectations when it reported full-year results in February, but its shares dropped on uncertainty over its 2026 guidance.
($1 = 0.8519 euros)
(Reporting by Yamini Kalia in Bengaluru and Joanna Plucinska in London; Editing by Nivedita Bhattacharjee)
