British Airways owner IAG reported a 16 per cent drop in second-quarter profit, citing higher fuel prices and weaker demand linked to the Middle East conflict. However, the group said corporate travel demand remained “strong” throughout the quarter, a trend it expects to continue into the second half of the year.
During an earnings call on Friday (31 July), IAG chief executive Luis Gallego said “robust” corporate travel demand continued to drive revenue growth for BA and Iberia, particularly across the North Atlantic market, which accounts for 30 per cent of the group’s overall capacity.
“Corporate revenue in Q2 was very strong, with [growth] in the high single digits year on year, driven by volume and yield,” Gallego said.
BA CEO Sean Doyle added that corporate demand from the technology and financial services sectors remained “strong”, while the carrier also recorded volume increases from SMEs and growth in ‘bleisure’ travel, which he said has been “a growing segment”.
North Atlantic corporate travel revenues for the British flag carrier increased 16 per cent year on year in Q2, while US point-of-sale was “much stronger”, Doyle said, with growth of more than 22 per cent year on year.
“Looking at [traffic] flows from North America to India, for example, we're doing very well on business traffic, and a lot of that traffic is bypassing the Gulf hubs,” Doyle said. “We’ve added more capacity into those markets to build on that momentum and we're seeing that trend continue into the second half of the year.”
Iberia, meanwhile, reported an 8 per cent year-on-year rise in corporate traffic during the quarter, with demand extending across its long-haul network, particularly in North America.
IAG, which also owns Aer Lingus, Vueling and LEVEL, said higher fuel prices affected all its airlines in the three months to 30 June, with fuel costs and emissions charges rising nearly 23 per cent to €2.22 billion.
Gallego said IAG offset 60 per cent of the increase through higher ticket pricing and cost initiatives, alongside its fuel hedging strategy.
The group now expects its full-year fuel bill to range from €8.3 billion to €8.6 billion, slightly below the €9 billion forecast in May.
After revising down its full-year capacity forecast in the previous quarter, IAG now expects 2026 capacity to be flat compared with 2025. The update follows similar downward capacity revisions from European rival Air France-KLM, which this week also reported a decline in profits amid rising fuel costs and the prolonged conflict in the Middle East.
Q2 and H1 metrics
IAG reported a 0.2 per cent year-on-year increase in second-quarter revenue to €8.9 billion. The group posted an operating profit before exceptional items of €1.41 billion for the period, down 16.3 per cent from €1.68 billion a year prior.
IAG's total capacity for the quarter, measured in available seat kilometres, fell 0.5 per cent year on year, while passenger revenue per ASK increased 1.6 per cent. Load factor rose 0.2 percentage points to 85.6 per cent.
British Airways posted an operating profit of £886 million for the first six months of the year, up £61 million year on year. Iberia reported a profit of €526 million, down €38 million from the same period last year. Vueling saw H1 profit fall €49 million year on year to €46 million, while Aer Lingus posted a €34 million loss, with the Irish carrier recently announcing capacity and job cuts as part of a plan to return to profitability.
IAG Loyalty's H1 profit increased £48 million to £239 million.