Half Year 2026 International Consolidated Airlines Group SA Earnings Call Transcript
Key Points
- International Consolidated Airlines Group SA (BABWF) delivered a robust first-half performance with an operating profit of EUR1.757 billion and a sector-leading operating margin of 10.9%, despite significant fuel cost headwinds.
- The company successfully recovered approximately 60% of the fuel cost increase through pricing and cost actions, demonstrating strong operational agility and pricing power, particularly in long-haul markets.
- IAG Loyalty continued its exceptional growth, with operating profit up 25% to EUR239 million and a margin of 19.3%, driven by strong non-airline partnerships and a 15% increase in Avios issuance.
- British Airways delivered a standout performance, growing operating profit by EUR44 million year-on-year, driven by strong premium and corporate demand, particularly in the North Atlantic where unit revenue increased 7.3%.
- The balance sheet remains strong and efficient, with net debt reduced to EUR4.7 billion and net leverage at 0.6x, enabling continued shareholder returns through dividends and a EUR1.4 billion excess cash return program.
- The company maintains a confident outlook, expecting to deliver a full-year operating margin within its 12% to 15% target range despite industry headwinds, supported by disciplined cost control and capacity management.
- The Middle East conflict had an immediate and significant impact on capacity and fuel costs, leading to a 12.5% increase in fuel unit costs and forcing the suspension of most routes to the region.
- Aer Lingus delivered an operating loss of EUR34 million, a significant swing from a EUR18 million profit last year, due to higher fuel costs and intense competitor capacity growth, particularly from US carriers on the transatlantic.
- The European short-haul market remains highly competitive, with significant capacity growth from other airlines limiting the ability to recover fuel cost increases through pricing, impacting Vueling and Aer Lingus.
- The company incurred EUR149 million in exceptional costs related to transformation and workforce programs at Iberia and British Airways, reflecting ongoing restructuring efforts.
- Full-year capacity guidance was reduced to flat, reflecting additional cancellations linked to the Middle East conflict and aircraft availability issues, with one aircraft delivery slipping into 2027.
- The company faces ongoing challenges from engine availability and supply chain issues, although the situation is improving, and it expects to recover only around 60% of the fuel cost increase, leaving a portion of the burden on margins.
Good morning, ladies and gentlemen, and welcome to International Airlines Group Half Year 2026 results.
At this time, all participants are in listen-only mode.
Later, we will conduct a question-and-answer session through the phone lines and instructions will follow at that time.
I would like to remind all participants that this call is being recorded.
I will now hand over to Luis Gallego, Chief Executive Officer, to open the presentation. Please go ahead.
Thank you very much. Good morning, everyone, and welcome to IIG's first half 2026 results.
A particular welcome today to Jose Antonio Baronevo, who has now taken over as our group CFO.
Also, as usual, I have the rest of the IIG Management Committee with me today.
This first slide captures the essence of where we are today as a group.
Since its inception in 2011, we have built IIG into a world-class business.
So
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