IAG Q3 results preview: can British Airways owner weather the fuel-cost squeeze?

IAG Q3 results preview: can British Airways owner weather the fuel-cost squeeze?

International Airlines Group (IAG) reports its third-quarter results on Friday 6 November, with investors looking for evidence that strong premium travel demand can offset higher fuel costs, geopolitical uncertainty and pressure on airline capacity.

The owner of British Airways, Iberia, Aer Lingus, Vueling and LEVEL enters the results after cutting its 2026 capacity outlook and reporting a 16% year-on-year decline in second-quarter operating profit. While transatlantic demand has remained resilient, higher fuel and emissions costs and weaker demand on some routes have complicated the outlook.

The central question is whether IAG can protect its margins while maintaining its investment plans and returning cash to shareholders.

Those looking to invest in IAG can do so through IG Invest or our share dealing service, while traders can access the share price via spread betting or CFD trading.

Fuel costs and profits under pressure

IAG’s second-quarter operating profit before exceptional items fell to €1.41 billion from €1.68 billion a year earlier, although it exceeded analysts’ expectations of €1.37 billion. Fuel and emissions costs rose almost 23% to €2.22 billion, reflecting the impact of higher energy prices.

The company nevertheless reduced its full-year fuel-cost forecast to €8.3 billion–€8.6 billion, from approximately €9 billion previously. Management expects to offset around 60% of the additional fuel burden through higher fares and cost reductions.

The Q3 results should show whether that mitigation strategy is working. Investors will be watching operating margins, unit costs and passenger yields to establish whether higher ticket prices are compensating for the increased cost of flying.

The oil-price environment remains a significant risk. Higher crude prices can feed through into aviation fuel costs, while airlines cannot always pass those increases on immediately without weakening demand. IAG’s ability to manage that trade-off will be central to its performance.

Those monitoring the oil market and its impact on airline costs can track Brent crude and other commodity markets through our platform.

Capacity cuts put demand in focus

In July, IAG reduced its 2026 capacity outlook to broadly flat growth, having previously expected growth of less than 3%. The company cited weaker travel demand associated with the conflict in the Middle East.

That decision reflects a more cautious approach to expanding capacity when costs are rising and demand visibility is deteriorating. It may also help protect fares by limiting excess supply, although the benefits depend on how demand develops across individual routes.

The third-quarter update should provide a clearer picture of bookings, load factors and passenger revenue as the group moves beyond the peak summer travel period.

Transatlantic routes remain particularly important. British Airways has continued to benefit from strong premium bookings, giving IAG exposure to higher-spending business and leisure travellers. The group said in July that it was approximately 57% booked for the second half of 2026, with revenue bookings broadly in line with the previous year.

Investors will want confirmation that this resilience has continued, particularly as household budgets and corporate travel spending come under pressure.

British Airways versus the wider group

IAG’s portfolio provides some diversification across markets and customer segments, but performance can vary considerably between airlines.

British Airways’ exposure to the transatlantic market and premium cabins is an important earnings driver. Iberia benefits from routes connecting Europe with Latin America, while Aer Lingus has substantial transatlantic exposure. Vueling gives the group a presence in the competitive European short-haul market.

The results should help investors assess whether strength in long-haul and premium travel is compensating for more challenging conditions elsewhere.

Operational reliability, staffing, aircraft availability and maintenance costs will also matter. Any disruption can increase expenses and reduce capacity at a time when airlines are already facing pressure on margins.

Cash flow and shareholder returns

IAG’s balance sheet and capital allocation remain important parts of the investment case.

For 2025, the group reported revenue of €33.2 billion and operating profit before exceptional items of €5.02 billion, with an operating margin of 15.1%. Free cash flow was €3.15 billion, while net leverage stood at 0.8 times. The company also announced €1.5 billion of excess capital returns.

Investors will be looking for evidence that cash generation remains robust despite the recent pressure on operating profits. Strong free cash flow would support fleet investment, balance-sheet resilience and further shareholder distributions.

However, a prolonged period of high fuel prices or weaker travel demand could reduce the cash available for those priorities. Management’s commentary on capital expenditure, debt and shareholder returns will therefore be important.

For income-focused investors, the combination of a growing dividend commitment and potential buybacks makes IAG an increasingly interesting case. You can find out more about the advantages of buying shares and how to assess capital-returns-focused investment cases through our educational resources.

Analyst ratings

According to LSEG Data & Analytics, analysts rate IAG as a ‘buy’ with a mean long-term price target at 546.15p, around 30% above the company’s current share price (as of 5 November 2026).

TipRanks rates IAG as a ‘strong buy’ but with a Smart Score of ‘6 Neutral’.

Technical analysis of the IAG share price

The IAG share price – up 5% year-to-date – has swiftly moved away from its 200-day simple moving average (SMA) at 417.6p after the US midterm election result triggered global risk-on sentiment. The IAG share has thus risen by over 10% from its five-month late October low at 394.7p.

IAG daily candlestick chart

For the bulls to regain control, a daily chart close above the August-to-September highs at 449.3p-to-450.9p would need to be seen. This was attempted on Thursday 5 November but this resistance zone held and led to the partial closure of the November price gap with Wednesday’s 436.30p high.

Only a break through the 449.3p-to-450.9p resistance area may push the June peak at 492.9p to the fore.

If, however, a sharp bearish reversal were to take the IAG share price below its October trough at 394.7p, the July-to-December 2025 lows at 378.7p-to-366.2p may be revisited.

How to invest in IAG shares

1. Do your research on IAG, the Q3 results on 6 November and the key metrics to watch across fuel costs, bookings and margins
2. Download IG Invest or open a share dealing account with us
3. Search for International Airlines Group (IAG) in our platform or app
4. Choose the number of shares or value of money you’d like to invest
5. Place your trade