International Consolidated Airlines Group S.A.

IAG reported first-half operating profit of EUR 1.757 billion, down EUR 121 million year on year, with an operating margin of 10.9%. In Q2, operating profit fell EUR 274 million year on year to EUR 1.406 billion, with a 15.8% margin versus 19% last year. Group revenue grew 1.0% in the first half; passenger revenue increased EUR 828 million at constant currency; cargo revenue fell EUR 23 million; and fuel unit cost rose 12.5%. Adjusted EPS decreased 10.9% and profit after tax before exceptional items was EUR 1.146 billion, down 11.9% year on year. Free cash flow was EUR 2.905 billion, up EUR 808 million; capex was EUR 1.291 billion; net debt was EUR 4.7 billion; net leverage was 0.6x; and gross leverage was 1.8x. For the full year, capex is now expected to be around EUR 3.4 billion, with 16 aircraft deliveries expected and one delivery slipping into 2027. Management reiterated its expectation for a full-year operating margin within the 12% to 15% target range.

Luis Gallego framed the quarter as proof that IAG’s model and strategy are holding up in a difficult environment. He emphasized diverse brands, strong demand, disciplined cost control, and cash generation, while noting that the group expects to preserve margins through capacity discipline and ongoing transformation. He also highlighted continued shareholder returns through a sustainable dividend and excess cash returns, and said the business should continue to improve next year.

Jose Barrionuevo Urgel focused on the resilience of the numbers despite fuel and FX. He said H1 operating profit was EUR 1.757 billion, operating margin 10.9%, FX was a EUR 52 million drag, and fuel unit cost rose 12.5% even after hedging gains of EUR 769 million in the first half. He also pointed to EUR 175 million of exceptional costs, mostly transformation-related, free cash flow of EUR 2.905 billion, capex of EUR 1.291 billion, net debt down to EUR 4.7 billion, and leverage at 0.6x net / 1.8x gross. On capital allocation, he reiterated priorities of balance sheet strength, 13% to 16% ROIC, a sustainable ordinary dividend, and returning excess cash, with around EUR 800 million already completed of the EUR 1.4 billion program.

Analysts focused on capacity cuts, European short-haul competition, Aer Lingus’s turnaround, CapEx, and fleet/engine issues. Management said full-year capacity is now flat, driven by slower resumption in the Middle East, deliberate capacity discipline, and some aircraft availability issues, while engine availability is improving and fewer aircraft are out this year than last. On Aer Lingus, management described a structural margin problem caused by higher competitor capacity and said the turnaround includes head-office cost actions, a 6% network reduction, product upgrades like Premium Economy and business-class refreshes, and productivity improvements, with the goal of reaching a 12% operating margin over time. They also reiterated confidence in the 777X timing, said they are still considering whether to add more XLRs, and declined to comment on potential sector consolidation or TAP strategy beyond saying IAG always evaluates opportunities.