International Consolidated Airlines Group Q2 Earnings Call Highlights

International Consolidated Airlines Group LON: IAG reported a resilient first-half performance as strong travel demand and cost controls partly offset higher jet fuel prices and disruption related to the Middle East conflict. The airline group posted operating profit of €1.757 billion for the first six months of 2026, down €121 million from a year earlier, while its operating margin was 10.9%. Revenue rose 1.0%, including growth of 1.9% in the first quarter and 0.2% in the second quarter. Chief Executive Officer Luis Gallego said the group remained confident it could achieve its full-year operating-margin target of 12% to 15%. “We have delivered a robust first-half performance,” Gallego said, pointing to the group’s portfolio of brands, global markets and continued demand for travel. He said IAG recovered about 60% of the increase in fuel costs through pricing and cost actions, although conditions differed between long-haul and short-haul markets. Fuel costs weigh on second-quarter results Chief Financial Officer José Antonio Barrionuevo said the Middle East conflict had an immediate effect on capacity and fuel costs, limiting the company’s ability to respond quickly. Fuel unit costs increased 12.5% during the first half, despite €769 million in hedging gains. Second-quarter operating profit declined by €274 million year-over-year to €1.406 billion, with the operating margin falling to 15.8% from 19.0% in the previous year. Passenger revenue increased by €318 million excluding foreign-exchange effects, but this was insufficient to offset a €489 million increase in fuel costs at constant currency. The group said it was around 70% hedged for the balance of 2026 and approximately 40% hedged for 2027. Foreign exchange was a €52 million drag on first-half operating profit, as the translation impact of a weaker pound sterling against the euro outweighed a modest favorable transaction impact. Passenger revenue rose by €828 million at constant currency in the first half. Cargo revenue fell by €23 million as lower volumes, mainly related to suspended Middle East routes, were only partly offset by a 3.3% increase in yields. British Airways was among the group’s strongest contributors, increasing operating profit by €44 million year-over-year. On a reported basis, British Airways generated operating profit of £885 million and lifted its margin to 11.9%. Management cited strong premium and corporate demand, particularly across the North Atlantic network. IAG Loyalty also delivered higher earnings, with operating profit rising £48 million to £239 million and its margin reaching 19.3%, up 3.4 percentage points. Gallego said Avios issuance increased 15% and active members rose 9%, supported by new partnerships including bp pulse and Uber Eats in the U.K. and Cinesa in Spain. Iberia reported operating profit of €526 million, down €38 million, while maintaining a 13.5% margin. The airline continued to see strong demand in Latin America, although higher fuel costs and engine-maintenance-related cancellations affected results. Vueling’s operating profit declined €49 million to €46 million amid fuel inflation and competitive pressure in European short-haul markets. Aer Lingus posted an operating loss of €34 million, compared with an €80 million profit a year earlier. Management attributed the reversal to higher fuel costs and competitor capacity growth, particularly from U.S. airlines. North Atlantic unit revenue increased 7.3% at constant currency, supported by British Airways premium and corporate demand. Latin America and Caribbean unit revenue rose 2.4% as capacity grew 5.3%. European unit revenue increased 1.2%, though the group described intra-European short-haul ma...