Aer Lingus and British Airways parent company IAG has posted annual profits that exceeded expectations, supported by lower fuel costs and sustained demand on key transatlantic routes, particularly in premium cabins.
Across Europe, airlines have continued to benefit from strong premium traffic over the North Atlantic. Wealthier travellers are still spending on higher-end fares, even as demand for economy tickets to the United States has softened.
IAG has been among Europe’s strongest performers in recent years, driven by expanded transatlantic connections across North and South America. However, more price-conscious customers have held back amid tariff uncertainty and mixed signals around US demand.In November, the group flagged weakness in the economy segment of the transatlantic market, a move that weighed on its share price at the time.
Chief executive Luis Gallego said that trading conditions have improved since the third quarter, noting a recovery in demand. He highlighted particularly strong premium and corporate bookings at British Airways, with forward bookings for the first quarter of 2026 also described as robust.
While IAG’s share price has since recovered, it has been overtaken in growth terms by Air France-KLM, whose shares have risen by 50% over the past year compared with IAG’s 36% increase. Other European carriers are similarly seeing solid premium demand. Lufthansa is introducing new premium seating products, while Air France-KLM continues to invest in upgraded cabins, lounges and onboard services.
IAG reported operating profit before exceptional items of €5.02 billion, ahead of the €4.97 billion forecast by analysts surveyed by LSEG and representing a 13% year-on-year increase. The group also announced plans to return €1.5 billion to shareholders over the next year, beginning with a €500 million share buyback due to be completed by the end of May. Capacity is expected to grow by around 3%, with no aircraft delivery delays anticipated from Airbus or Boeing.
Finance chief Nicholas Cadbury said visibility for the second and third quarters remains limited, which is why the group has not issued more detailed forward guidance. He also pointed to some softness in the Africa and Middle East markets.
IAG, which owns Aer Lingus, British Airways, Iberia, Vueling and Level, carried 121.6 million passengers in 2025, a slight decrease of 0.4% compared with 122 million in 2024.
British Airways alone saw passenger numbers edge up by 0.4%, rising from 46.2 million to 46.3 million.
