International Consolidated Airlines Group (LON:IAG) executives told investors the company delivered what CEO Luis Gallego called a “record set of results” for the 2025 full year, supported by continued demand for travel, improved operations and customer metrics, and a lower fuel bill. The group also announced increased shareholder distributions, including a new EUR 1.5 billion excess cash return program.
Record profit, margin and cash generation
CFO Nicholas Cadbury said IAG generated a record operating profit of EUR 5.024 billion, up EUR 581 million year-over-year, driven by passenger revenue growth, contributions from other revenue streams such as loyalty and maintenance, and lower fuel costs. Operating margin reached 15.1%, up 1.3 points from the prior year and at the top end of the group’s 12%–15% target range.
IAG reported EUR 3.1 billion in free cash flow after investing EUR 3.4 billion in capital expenditures. Cadbury said free cash flow was supported by working-capital movements, including IAG Loyalty and the Amex contract renewal, as well as interest benefits from early debt repayment, partially offset by higher purchases of carbon assets and a payment to HMRC linked to an IAG Loyalty VAT dispute.
Cadbury said the balance sheet remains “very strong,” highlighting net debt leverage of 0.8x and liquidity above EUR 10 billion. Gross debt leverage ended the year at 1.9x after repaying EUR 1.6 billion of non-aircraft debt, with two-thirds of 25 aircraft deliveries taken as unencumbered. He reiterated an aim to keep gross debt leverage between 1.5x and 2.0x.
Shareholder returns: higher dividend and EUR 1.5 billion excess cash returns
Gallego said IAG is “delivering for our shareholders” through a higher dividend and an expanded excess cash return program. Cadbury said the 2025 dividend totals EUR 448 million, with an intention to grow it broadly in line with inflation while dividend per share grows faster as shares are repurchased.
IAG also announced a further EUR 1.5 billion of excess cash returns over the next year, which Cadbury said represents roughly 6.5% of market capitalization at current levels. He added that over the three years since 2024, the group expects to have distributed just under EUR 3 billion of excess cash, around 13% of current market cap.
To reflect rising future capital expenditures, Cadbury said IAG has widened guidance on distributing excess cash returns to a net leverage range of 1.0x to 1.5x, while maintaining an across-the-cycle net leverage aim of less than 1.8x as a proxy for investment-grade status.
Business performance by airline and loyalty
Cadbury said all operating companies produced strong results in 2025:
- Aer Lingus: Operating margin improved to 11%, with operating profit at its second-best level on record. Management noted last year’s base was affected by industrial action, and the carrier held unit revenue flat while growing capacity amid a competitive Dublin market, particularly from U.S. carriers.
- British Airways: Delivered a margin at the upper end of the group target range, supported by strong premium leisure and improving corporate demand. Management said results reflected continued investment alongside the transformation program.
- Iberia: Posted a record 16.2% operating margin and EUR 1.3 billion operating profit toward its EUR 1.4 billion ambition under Flight Plan 2030. Management cited strong revenue performance, particularly in Latin America, but noted costs were affected by engine availability issues and related disruption/resilience expenses.
- Vueling: Delivered operating profit of GBP 393 million with a 12% margin, which IAG described as among the strongest in the European low-cost sector. Revenue reflected softer summer travel conditions in parts of Europe, partly offset by strength in Spanish domestic routes, while management emphasized strong cost performance.
- IAG Loyalty (including Holidays): Reported GBP 469 million profit with an 18% margin and met its ambition of at least 10% margin growth. Cadbury said that excluding the impact of an HMRC VAT dispute under litigation, operating profit “would have reached over GBP 500 million.”
Demand, network trends and 2026 capacity plans
IAG said travel demand remained strong through 2025, with capacity up 2.4%. Passenger unit revenue increased 1% at constant currency and was flat on a reported basis. Regional unit revenue trends included:
- North Atlantic: Capacity up 1.4%, unit revenue up 1.5% at constant currency, with Q4 improving to +1.8%. Management said premium demand was good, partially offset by softness in U.S. point-of-sale economy leisure and continued U.S. direct capacity growth into hubs such as Dublin and Madrid.
- Latin America: Capacity up 3.3%, unit revenue up 3.3% at constant currency; management called this the strongest performer, led by Iberia.
- Europe: Capacity up 2.2%, unit revenue down 2.1% at constant currency, reflecting softer summer demand in parts of Europe and additional British Airways capacity.
- Asia Pacific: Capacity up 6.4% and unit revenue up 4.2%, supported by network refocusing toward stronger markets and the full-year impact of Iberia’s relaunched Tokyo routes.
For 2026, IAG plans disciplined capacity growth of around 3%. On the call, management said growth is expected to be above 3% in North America and stronger in South Atlantic (around 4.5%+), roughly flat across Europe, and up in Asia Pacific from a lower base.
Costs, fuel and operational initiatives
Cadbury said non-fuel unit costs rose 2.8% year-over-year in 2025, in line with guidance, while total unit costs improved 0.4%. Employee unit costs increased 3.8% due to operating investments and performance-linked payments. Ownership costs rose 10% reflecting new aircraft and customer investments including cabin retrofits, lounge upgrades, and digital platforms. Fuel costs fell 9.1% due to lower prices, partly offset by higher carbon-related costs (ETS and CORSIA).
For 2026, IAG expects non-fuel costs to be down around 1% (including a roughly 2% FX benefit, meaning about +1% on a constant currency basis). Cadbury also flagged fuel-price volatility, noting that a December 31 forward curve implied a 2026 fuel bill of about EUR 7.0 billion (with 62% hedged), but recent jet fuel price increases could raise that to around EUR 7.4 billion, including about EUR 150 million of year-over-year ETS and CORSIA cost increases.
Operationally, Gallego said investments improved punctuality and net promoter scores. At British Airways, management said on-time performance exceeded 80%, the best since 2014 and a 20-point increase versus 2023. Gallego also highlighted a groupwide partnership with Starlink to provide high-speed connectivity, with the first Starlink-enabled British Airways aircraft expected to enter service in “a few weeks.”
On supply chain and engine availability, management said aircraft manufacturers are expected to deliver 17 aircraft in 2026, with buffers for potential delays. However, executives cited ongoing engine constraints: GE engine spare shortages affecting Iberia’s A330s, GTF-related groundings at Vueling (averaging about 16 aircraft grounded), and British Airways 787s grounded due to a “growth issue,” with recovery targeted for May.
On sustainability, Gallego said IAG increased sustainable aviation fuel usage to 3.3% of total fuel volumes from 1.9% in 2024 and reported carbon intensity of 77.5 grams of CO2 per passenger kilometer, ahead of target.
About International Consolidated Airlines Group (LON:IAG)
International Consolidated Airlines Group SA, together with its subsidiaries, engages in the provision of passenger and cargo transportation services in the United Kingdom, Spain, the United States, and rest of the world. It also provides aircraft leasing, aircraft maintenance, tour operation, air freight operations, call centre, ground handling, trustee, retail, IT, finance, procurement, storage and custody, aircraft technical assistance, human resources support, and airport infrastructure development services; and manages airline loyalty programmes.
