International Airlines Group (IAG), the parent company of British Airways, announced it has abandoned plans for expansion for the remainder of the year due to increased fuel costs and disruption in global travel linked to the conflict involving Iran. The group, which also includes Iberia, Aer Lingus, and Vueling, indicated its capacity for the year will remain flat, reversing an earlier expectation of a 3% increase.

Despite plans to continue growth and the delivery of 16 new aircraft this year, IAG cited soaring fuel prices following recent US-Israeli strikes on Iran as a major factor in its decision. The company now forecasts fuel expenses between €8.3 billion and €8.6 billion for the year, which is lower than the €9 billion forecast in March but still more than €1 billion above last year’s levels.

IAG posted a 19% decline in pre-tax profits for the first half of 2024, falling from €1.7 billion to €1.4 billion, even as revenue saw a modest 1% increase to €16 billion. Shares in the company dropped 1.5% following the announcement.

The airline group expects to offset approximately 60% of the increased fuel costs through higher ticket prices and efficiency measures. However, significant competitive pressure, especially in short-haul European markets like Spain where capacity has expanded notably, has limited the group’s ability to fully pass on these costs to consumers.

While the overall short-haul segment faces heightened competition, IAG anticipates a positive environment in the long-haul market for the year. British Airways, in particular, has benefited from a rise in corporate travelers who have shifted away from transiting through Gulf carriers, instead opting for direct flights to Asian destinations.

Chief Executive Luis Gallego affirmed that demand for travel across the group's network remains robust despite recent volatility. The group’s strategy reflects a cautious approach amid ongoing geopolitical tensions and fuel market uncertainties, seeking to balance growth aspirations with operational realities.