British Airways Over Warns of Lower Profits and Rising Fares Over Increasing Jet Fuel Prices
The parent company of British Airways, International Airlines Group (IAG), has warned that its annual profits will be lower than expected as the ongoing US-Iran war drives a massive spike in energy costs. The group, which also owns Aer Lingus, Iberia, and Vueling, now expects its total fuel bill for the year to reach €9 billion (£7.8 billion), which is a staggering €2 billion more than previous estimates.
Despite the financial headwind, IAG chief executive Luis Gallego remains confident that the airline will avoid cancelling flights over the summer. While the conflict has disrupted supply chains and led to the effective closure of the Strait of Hormuz, which is a vital route for one-fifth of the world’s oil, Gallego noted that IAG’s investment in fuel self-supply at its main hubs and diverse global sources would protect its operations.
To offset the surge in oil prices, which peaked at $126 a barrel during the conflict, IAG has confirmed that passengers will bear some of the burden.
“The impact of the higher fuel price will inevitably lead to lower profit this year than we originally anticipated,” said Luis Gallego. He added that all airlines “need to increase fares in order to mitigate the impact” of fuel costs, which typically account for a quarter of an airline's expenses.
IAG hopes to recover about 60% of the additional €2 billion through these price increases and other cost-management efforts. The company is currently 70% hedged for the remainder of 2026, providing some protection against further price volatility.
The wider aviation industry is already reeling from the crisis. Recent data from Cirium shows that 13,000 flights scheduled for May were cancelled as airlines attempted to redraw operations. In the UK, the government has given carriers more flexibility to consolidate flights to preserve fuel stocks.
While ministers maintain that supply is stable, some analysts warn the UK is Europe's most exposed nation due to their low storage capacity and a reliance on imports. IAG acknowledged the global risk, stating: “If the current conflict continues to restrict flows of both crude oil and jet fuel from the Middle East, there is the potential for supplies of jet fuel to be restricted on a global basis.”
IAG reported a strong first quarter with pre-tax profits rising over 76% to €422 million, driven by robust demand. The group has also successfully redeployed capacity away from the Gulf region, boosting flights to destinations like Bangkok, Singapore, and India where demand for direct travel has increased.
“We are actively managing the uncertainty created by the fuel price increase and its impact, taking the necessary action on yields, costs and capacity,” Gallego told investors. While IAG’s share price dipped up to 5% following the profit warning, analysts noted the group remains better positioned than many peers due to its focus on premium passengers and its strong balance sheet.
