By Joanna Plucinska and Raechel Thankam Job Feb 27 (Reuters) - British Airways owner IAG reported better-than-expected annual profit on Friday, helped by lower fuel costs and demand strength on core
IAG beats profit forecasts, but shares slide on outlook uncertainty
By Joanna Plucinska and Raechel Thankam Job
Annual results, share reaction and outlook
Profit beats forecasts on fuel costs and demand
Feb 27 (Reuters) - British Airways owner IAG reported better-than-expected annual profit on Friday, helped by lower fuel costs and demand strength on core transatlantic routes and in premium cabins.
Shares slide as analysts weigh guidance and fuel-price risks
Still, its shares were down 6% at 1127 GMT, with some analysts disappointed by a lack of profit guidance for this year and worried about potentially higher fuel prices.
Premium demand drives transatlantic strength
European airlines have been buoyed by premium demand across the North Atlantic, a sector-wide trend in which affluent travellers continue to spend even as U.S. demand for economy fares has softened.
IAG’s transatlantic positioning and shifting demand signals
IAG has been a European leader in recent years thanks to strengthened transatlantic links in North and South America. However, price-sensitive travellers have pulled back against a backdrop of tariff-related uncertainty and shifting U.S. demand signals.
The group warned in November of weakness in the economy segment of the transatlantic market, sending its share price lower.
CEO comments on rebound and early-2026 bookings
"Since Q3 we have seen a rebound," Chief Executive Luis Gallego told a media call, adding that premium and corporate demand were performing particularly well at British Airways and that bookings for the first quarter of 2026 were strong.
Peer performance and competitive premium upgrades
The shares have since recovered, but IAG has lost top spot for share-price growth to Air France-KLM, shares in which have jumped by 50% in the past year. IAG shares are up 36% over the same period.
Other European carriers are also benefiting from robust demand at the top end of the market, with Lufthansa rolling out new premium seats and Air France-KLM enhancing premium products through upgraded cabins, lounges and onboard services.
Operating profit details versus analyst expectations
IAG reported operating profit before exceptional items of 5.02 billion euros ($5.93 billion), slightly ahead of the 4.97 billion euros forecast by analysts polled by LSEG and up 13% year on year.
Shareholder returns: buyback and payout plan
The company said on Thursday that it would return 1.5 billion euros to shareholders over the next 12 months, starting with a 500 million euro share buyback to be completed by the end of May.
Capacity growth and aircraft delivery expectations
It added that it expected capacity growth of about 3%, with no delivery delays projected from planemakers Airbus and Boeing.
Visibility concerns for upcoming quarters
Finance chief Nicholas Cadbury told reporters there was still little visibility for the second and third quarters, explaining why the group did not provide a more detailed outlook, and there was some weakness in the Africa and Middle East region.
($1 = 0.8462 euros)
(Reporting by Joanna Plucinska in London and Raechel Thankam Job in Bengaluru. Editing by David Goodman and Mark Potter)
