International Consolidated Airlines Group Q2 Earnings Call Highlights

• Second-quarter operating profit fell €274 million to €1.406 billion with margin declining to 15.8% from 19.0%, as a €489 million fuel cost increase outweighed €318 million in passenger revenue gains
• British Airways and IAG Loyalty performed strongest with operating profits up €44 million and £48 million respectively, while Aer Lingus swung to a €34 million loss from €80 million profit requiring a major turnaround plan
• Free cash flow rose €808 million to €2.905 billion in the first half, reducing net debt to €4.7 billion from €5.9 billion and lowering net leverage to 0.6 times

IAG Q2 2026 Earnings Summary

Financial Performance:

International Consolidated Airlines Group (LON: IAG) reported first-half 2026 operating profit of €1.757 billion, down €121 million year-over-year, with a 10.9% operating margin. Revenue increased 1.0% overall (Q1: +1.9%, Q2: +0.2%). Second-quarter operating profit fell €274 million to €1.406 billion, with margins declining to 15.8% from 19.0% in the prior year.

Key Challenges:

Higher jet fuel prices and Middle East conflict disruptions significantly impacted results. Fuel unit costs surged 12.5% in the first half despite €769 million in hedging gains. The Q2 fuel cost increase of €489 million at constant currency outweighed a €318 million passenger revenue gain. The company is approximately 70% hedged for remaining 2026 and 40% hedged for 2027.

Operational Highlights:

• British Airways delivered the strongest performance, increasing operating profit by €44 million to £885 million (11.9% margin)
• IAG Loyalty operating profit rose £48 million to £239 million (19.3% margin), with Avios issuance up 15%
• Iberia posted €526 million operating profit (down €38 million), maintaining a 13.5% margin
• Aer Lingus swung to a €34 million operating loss from an €80 million profit, prompting a transformation plan

Strategic Actions:

IAG revised full-year capacity guidance to flat from +1% growth, reflecting Middle East route suspensions and capacity discipline. The company plans to resume select Middle East routes beginning September 1. Management maintained its 12-15% full-year operating margin target.

Financial Position:

First-half free cash flow strengthened to €2.905 billion (up €808 million). Net debt improved to €4.7 billion from €5.9 billion, reducing leverage to 0.6x. The company completed approximately €800 million of its €1.4 billion share buyback program.