International Airlines Group (IAG), the parent company of British Airways, Iberia, Aer Lingus, Vueling, and Level, reported a significant decline in profits for the second quarter of 2026 amid rising fuel costs linked to the ongoing conflict in the Middle East. The group’s pre-tax profit fell 35%, decreasing to €732 million (£626 million) for the quarter ending June 30, down from €1.1 billion a year earlier. For the first half of the year, pre-tax profits dropped 19% to €1.4 billion from €1.7 billion in the same period in 2025.

The surge in aviation fuel prices, which increased by 23% due to geopolitical tensions involving the US, Israel, and Iran, substantially raised combined fuel costs and emissions charges by €413 million. Despite these headwinds, IAG's revenue remained relatively stable, rising slightly to €8.9 billion in the quarter and to €16.1 billion over the first six months. The company carried approximately 57.9 million passengers during the first half of the year, maintaining numbers similar to those of 2025.

In response to the challenging environment, IAG has revised its growth outlook, now expecting capacity to remain flat for the year, compared to an earlier forecast of around 3% growth. The company cited factors including increased competition from budget airlines, which some passengers have been switching to amid weaker demand in certain markets. Nevertheless, IAG expects demand for travel across its network to remain strong, with 57% of seats booked for the second half of the year and long-haul routes anticipated to perform positively.

Chief Executive Luis Gallego emphasized that the group’s “excellent fundamentals” and its diverse airline portfolio position it well to withstand short-term uncertainties. He highlighted the group's ability to maintain profitability better than many industry peers, attributing this resilience to tight control over operating costs and a fuel bill that was lower than initially forecast.

Equity analysts have noted that while the profit dip is notable, IAG’s results were better than market expectations given the backdrop of geopolitical instability and fuel price volatility. The group’s shares declined modestly following the earnings release, reflecting investor concerns over the reduced growth prospects and rising operational expenses.

Overall, IAG’s updated outlook and results illustrate the impact of external factors such as the Middle East conflict on the airline industry, with elevated fuel prices and shifting passenger demand creating ongoing challenges for major carriers.