International Airlines Group (IAG) has reported yet another year of record financial performance, with 2025 operating profits climbing 17.3% to €5bn. Operating margin grew 1.3 percentage points to 15.1%.
Profit after tax for the year rose 22.3% to €3.3bn, driven by sustained demand, as well as the execution of its strategy and transformation programme. Profit before tax was up 26.4% to €4.5bn.
The company is proposing a final dividend for 2025 of €228 million, or €0.05 per share, increasing the total dividend per share by 8.9%.
With the continued strong results, the company has launched a €500 million share buyback, which is expected to be complete by the end of May. The company said it is returning €1.5bn of excess cash over the next year – including this initial buyback programme.
The company – owner of Aer Lingus, British Iberia, Level, and Vueling – noted that trading was “generally strong” across all its markets. However, the third quarter saw some softness, though the company was still able to deliver the record results and closed the year strongly.
Additionally, fourth quarter results saw a 0.8% decrease in overall revenues, down to $8bn, while operating profit was down 2.5% in the quarter to €1.1bn.
US-led tariffs in the first half of the year and consistent geopolitical issues throughout 2025 had created economic uncertainties – presenting some challenges for the airline group.
“Despite these challenges, demand for travel proved to be robust overall and some areas of softness, such as US point-of-sale leisure and intra-European travel, particularly in central Europe, were offset by demand in other areas, including Latin America and the Spanish domestic region,” IAG’s report said.
The company said the demand for high-yield premium travel “remained strong”.
Cargo revenues had weakened slightly in the second half of 2025 as the Red Sea disruption to sea cargo had normalised. MRO and loyalty revenues continued to grow.
Free cash flow was down €410 million to €3.1bn in 2025 – largely driven by the impact of expected capital expenditure increases during the year.
For the year, overall revenues were up 3.5% to €33.2bn, including passenger revenues climbing 2.5% to €29bn. Additionally, other revenue – including its loyalty programme – saw the larges growth at 16% on 2024, reaching €3bn.
Revenue growth outpaced total operation expenses, which grew 1.3% to €28.2bn – resulting in the higher operating profit. The slower-paced expense growth benefitted from lower fuel costs and favourable foreign exchange, offset by vouchers given to customers for disruptions to operations in the year and higher supplier costs.
“This sector-leading operational performance is translating into world-class financial results, with outstanding margins and superior return on capital,” said IAG CEO Luis Gallego. “We are confident as we look to the future, with compelling market dynamics, long-term secular growth and a clear plan to leverage our business model and deliver our strategy.”
These factors are driving a positive outlook for 2026 and IAG said it is “well positioned” to continue creating long-term value for shareholders.
Capacity is expected to increase around 3% during the year across its airlines. Non-fuel unit costs are set to be down around 1% - benefitting from favourable foreign exchange.
First quarter 2026 bookings are “strong”, benefitting from an earlier Easter Holiday period this year.
Cargo revenue will continue to be impacted in 2026 by the normalising Red Sea shipping disruption.
Other revenues – including loyalty – are expected to grow low-single digits.
The company said in its report that it remains “confident” in its legal case against the UK’s HMRC related to its loyalty programme, which is scheduled to be heard at the end of this year.
IAG paid the UK tax office €673 million early last year for a VAT claim related to the loyalty programme. The tax office claims that 20% VAT should be applied to all Avios point redemptions, while the company said that redemptions are typically for flights and should be zero-rated. IAG is seeking to appeal the VAT claim.
Additional year-on-year costs related to carbon management schemes – ETS and CORSIA – is expected to be around €150 million.
The company said it is continuing engagement with government and regulators to “find solutions” to the current regulatory requirements in Europe related to net zero emission targets for 2050.
“The current regulatory requirements mean that European airlines will continue to be burdened with significant extra cost and be disadvantaged compared to our global competitors,” said IAG.
Capital expenditure for 2026 is expected to be around €3.6bn for 2026 – depending on fleet deliveries. The company expects 17 aircraft deliveries this year – majority of which will be unencumbered.
During the company’s earnings call, Gallego said the company is “pretty sure that the manufacturers are going to comply” with the delivery plans.
However, he noted that engines have continued to be an issue for the company.
“We are having problems with the GE engines, particularly in Iberia where they are suffering the lack of spare engines for the A330s,” he said. “We are having problems with the GTF engines at Vueling. They have 16 aircraft grounded on average because of the [inspection] situation.”
He noted too that British Airways (BA) has continued to have grounded 787s as a result of durability issues with the Rolls-Royce Trent 1000 engines.
“We hope that, in the case of BA, this situation is going to be recovered in May… we continue working with the different OEMs to try to improve the situation,” he said. “It is improving, but slowly.”
As of the end of the year, the company’s net debt was reduced to 0.8x and had a liquidity of over €10bn – positioning the company well for the future.