IAG Shares Slide as Airline Group Warns of Lower Profit Despite Strong Q1

International Airlines Group (LON: IAG) shares fell sharply on Friday after the British Airways and Iberia owner warned that rising fuel costs driven by the ongoing Middle East conflict would weigh on its full-year profits, despite delivering a robust first-quarter performance.

The stock initially tumbled to a low of 372.7p before recovering slightly, and was last trading down over 2% at 388.1p in Friday morning trade.

IAG reported a strong start to 2026, with first-quarter revenue rising 1.9% to €7.18 billion and operating profit surging 77.3% to €351 million — an operating margin of 4.9%, up 2.1 percentage points year-on-year. The group’s capital-light Loyalty business was a standout performer, with revenues climbing 10% and profit growing 32.6%.

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However, investors were rattled by the company’s cautious outlook. Chief Executive Luis Gallego warned that higher fuel prices stemming from the Middle East conflict would “inevitably lead to lower profit this year than we originally anticipated.”

Based on the fuel curve as of 5 May, IAG’s total fuel bill is now expected to reach approximately €9.0 billion. The group said it expects to recover around 60% of the additional fuel costs through revenue and cost management actions.

Free cash flow is also now expected to fall short of the €3 billion target set out at February’s full-year results, and capacity growth has been trimmed to around 1% in Q2 and 2% in Q3, down from a previously guided 3%.

Despite the headwinds, Gallego struck a resilient tone, pointing to IAG’s strong balance sheet — with net leverage of just 0.5x and liquidity of €12.7 billion — and confirmed the group remains on track to complete its remaining €1 billion excess cash return by the end of February 2027.