IAG Shares: Analyst Stays Constructive Despite Tougher Quarter

Edison analysts told clients in a note on Monday that International Airlines Group (LON: IAG) shares remain underpinned by the resilience of the British Airways owner’s business model, even after a more challenging second quarter, noting the stock trades at a premium to peers while generating industry-leading margins.

On valuation, analyst Russell Pointon wrote IAG “trades at a modest premium to the FY26 median peer multiple of 7.0x, despite generating industry-leading margins.”

That profitability held up despite headwinds. Pointon noted that after a strong first quarter, the second quarter “bore the brunt of the disruption from the Middle East conflict,” which showed up in lower-than-expected capacity and higher fuel prices.

However, resilient demand, particularly in premium long-haul markets, a diverse network and operational improvements helped offset the pressure.

Second-quarter revenue rose 0.2% as yield strength, up 1.6%, offset a 0.5% decline in capacity. Operating profit before exceptional items fell about 16% to 1.41 billion euros, roughly 4% above consensus, with 60% of the near-500-million-euro fuel cost increase recovered through pricing and cost actions.

The group operating margin held at 15.0%, while free cash flow rose to 2.9 billion euros from 2.1 billion euros a year earlier.

Management reduced its capacity outlook to flat versus 2025 but said demand “remains supportive,” with second-half booked revenue at 57%.

Edison noted that management remains confident of delivering a full-year operating margin within its 12% to 15% target range, generating significant cash to fund shareholder returns.