BA Thrives, Aer Lingus Struggles In HY2026

International Airlines Group (IAG) reported a strong first half of 2026. The Group grew its operating profit before exceptional items to €1.8 billion. Despite headwinds, Q2 produced a €1.4 billion operating profit, resulting in an operating margin of 15.8 percent. British Airways produced the best results. Consolidated revenues of British Airways, Iberia, LEVEL, Vueling, Aer Lingus and IAG Loyalty grew just 1.0 percent to €16.1 billion, or by just 0.2 percent in Q2 to €8.9 billion. Expenses rose 2.0 percent in HY1 to €14.3 billion but were up by 4.1 percent in Q2 to €7.5 billion. The higher fuel costs became visible only in the Q2 results, up 22.8 percent to €2.2 billion. The result is a consolidated operating profit for HY1 of €1.8 billion versus €1.9 billion last year. Including charges and other costs, IAG reported a profit after tax of €1.1 billion, down 11.9 percent year over year. The operating profit for Q2 was down 16.3 percent to €1.4 billion. Net profit was down by 24.9 percent to €845 million. Passengers carried for HY1 were up 0.2 percent to 57.9 million but down by 0.3 percent yoy in Q2 to 31.5 million. Capacity was down by 0.1 percent in HY1 and by 0.5 percent in Q2. The load factor was marginally up to 85 and 85.6 percent for the two periods. BA British Airways continued its recovery already seen in Q1, once again leading IAG as the airline with the best operating profit. It ended HY1 with an £885 million operating result, up £61 million year-over-year, at a 11.9 percent margin. However, the Q2 operating profit was down by £54 million. Total HY1 revenues grew by 5.4 percent to £7.4 billion despite a 1.2 percent lower capacity, offset by price increases. “British Airways has delivered very good unit revenue performance that reflects its excellent network and schedule across the North Atlantic (capacity up slightly in the first half, by 0.5 percent) as well as its premium offering and strong corporate travel demand”, the earnings release says. CEO Sean Doyle said that NA capacity grew thanks to more availability of Rolls-Royce-powered Boeing 787s. BA also grew capacity to India and Asia as there is more demand for direct flights that bypass the Middle East. BA is reaping the fruits of the transformation program, with new commercial systems on the website and app, driving revenue improvement and cost initiatives supporting future margins. During the first half, it made significant progress with its commercial platform transformation. “The revenue management and upgraded payments systems implemented in 2025 are delivering revenue-positive benefits in line with expectations. British Airways is also targeting significant efficiencies across its support functions over the next two years.” Doyle said the transformation is about 60 percent through. On-time performance stood at 83 percent, which confirms that BA is making solid improvements here. It is now on par with that of Aer Lingus but still lags behind Iberia's 89.8 percent and 84.3 percent at Vueling. Iberia Iberia, for a long time the leading airline within IAG when it comes to financial performance, still produced the strongest operating margin at 13.9 percent. But it suffered from higher fuel and maintenance costs that resulted in cancellations, reducing the HY1 operating result to €526 million, down €38 million year-over-year. The result was down by even €65 million in Q2. Iberia grew capacity in Q2 by 18 percent as it introduced more Airbus A321XLRs to the network, specifically to North America (Toronto and Newark) and moved to a daily frequency to Washington. Capacity to South America was up 3 percent in HY1 as it increased frequencies to key airports and deployed the A321XLR on new routes to Recife and Fortaleza in Brazil. In its quest to reduce costs and improve efficiency, Iberia recently carried out a voluntary early-retirement program. Around 1.000 employees in all disciplines have taken up the offer. “This will also enable Iberia to shape its future workforce with the skills and technology support to drive higher productivity and value creation.” Like Iberia, Vueling felt the impact of high fuel costs more than BA. The operating result of €46 million was down by €49 million yoy, or by €76 million in Q2. Total revenues grew 1.5 percent to €1.5 billion. The HY1 margin was 3.0 percent, down from 6.4. The results of LEVEL are not specified, but Gallego said that San Francisco, Boston and Los Angeles have been cancelled to redirect the capacity on routes where there is more demand. Gallego sees an opportunity for low-cost long-haul in Barcelona. “We need to do adjustments to address the leisure market.” [caption id="attachment_196369" align="aligncenter" width="513"] Aer Lingus Airbus A321XLR[/caption] Struggling Aer Lingus Causing the biggest headaches is Aer Lingus, which is feeling the effects of not just higher fuel costs but also stiff competition on the North Atlantic. This translated into an operating loss of €34 million versus a €145 million profit last year. The Q2 result was €-66 million. Revenues were down 1.5 percent to €1.1 billion. CEO Lynne Embleton said that this is the first HY loss since the pandemic. “Of the €114 million swinging into a loss, only €45 million is fuel. So we are looking at a change in the structural environment. We see growing short-haul capacity from our competitors, so we can’t sustain that level of revenue pressure with the costs we have”, CEO Lynne Embleton said on the earnings call. “Aer Lingus has increased capacity very slightly in the North Atlantic (up 0.1 percent in the first half) through the deployment of its own XLR-related network, including new routes to Cleveland, Pittsburgh and Indianapolis which are performing well. This offset the closure of the Manchester base in March. It has also seen significant capacity growth from US carriers over the last 18 months (up 45 percent over the last 12 months). As a result, its unit revenues were down 3.8 percent in the first half,” the earnings release says. The carrier is implementing a major transformation that will see over 25 percent of senior management positions or 500 roles, go at its Dublin headquarters, while supplier costs will also be reduced. Aer Lingus has also taken out lower-margin short-haul and long-haul routes, reducing capacity by 6 percent. The transformation program includes various revenue initiatives, including Premium Economy and a refresh of Business Class. “We do need to see productivity improvements to bridge our operating margins. If we do all those things, we are confident that we can get back to being the best in class at IAG again”, Embleton said. It should get Aer Lingus back to a 12 percent operating margin, but some benefits will come earlier than others. A higher margin will get the airline into a position to induct more new-generation and more efficient aircraft, further rebuilding margins. Guidance IAG guides capacity growth for 2026 to be flat, the effect of cutting destinations in the Middle East. Demand remains strong, with 57 percent of capacity now booked for HY2. Long-haul markets are performing strongly, but Luis Gallego sees pressure on short-haul. He said that IAG expects to recover about 60 percent of the higher fuel costs through revenue and cost initiatives. The group is hedged 80 percent. Gallego is confident that IAG will get to a 12 to 15 percent operating margin. On fleet, IAG expects 16 deliveries this year. After two XLRs and one A320neo in HY1, another six A320neos, two A320neos/XLRs, two Boeing 787-10s, and the first three MAX 8200s for Vueling are scheduled for delivery in HY2. The MAX will drive significant cost efficiencies compared to the Airbus fleet, which has suffered a lot from the P&W Geared Turbofan issues a lot. Iberia will get the last XLR in the coming months, but Gallego said that the group has options that could be taken, but that decision has not been made yet. Iberia is most happy with the aircraft, as it performs very well on routes where an A330 is too big. IAG Loyalty had a strong HY1, which produced an €239 million operating result in HY1 (up 48 percent). IAG intend to grow the operating profit at over 10 percent a year and reach €1 billion in operating profit in the medium term. This must partially come from offering better products, including cabin upgrades at British Airways and the roll-out of StarLink.

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