British Airways and Iberia Best-Performers within IAG

International Airlines Group (IAG) reported solid results for 2025 with a consolidated net profit of €3.3 billion, up from €2.7 billion year-over-year. Except for Aer Lingus, all airlines exceeded the targeted operating margins of 12 to 15 percent. Notably, British Airways is reaping the fruits of its transformation program, but Iberia remains the best-performing airline within IAG. Let’s take a closer look. British Airways British Airways reported an £2.2 billion operating profit before exceptional items, up £182 million year-over-year. With a £824 million profit in HY1, it shows just how strong HY2 has been. It is also evident from the operating margin, which was at 11.7 percent at the end of June but improved to 15.2 percent by late December. This exceeds the average of 13 percent between 2017 and 2019 and surpasses 14 percent in 2024. Revenues were up 1.9 percent to £14.7 billion, but passengers carried were up by just 0.4 percent to 46.3 million and ASKs by 1.7 percent to 178.2 million. The load factor was down by 1.4 percent to 83.8 percent, and tonnes of cargo carried were also down 1.4 percent to 3.8 million. In 2024, BA announced a transformation plan with over 1.200 initiatives to improve operational efficiency. It also includes £7.0 billion in investments in new aircraft, cabin retrofits, a new website and other digital platforms, new IT systems, and the introduction of AI, all to improve the customer experience. So, where is BA making progress? CFO Nicholas Cadbury was unwilling to share details of the transformation savings, except to say they are at a high level. On the improved margin, CEO Sean Doyle said during today’s earnings call: “We delivered our 15.2 percent earlier than we set out 14 months ago. We already see the benefits of our transformation, such as improved operational performance, higher net promoter scores, and reduced non-performance-related costs. We expect that to carry on.” Indeed, on-time performance has significantly improved. It was just 60.4 percent in 2023, but thanks to many initiatives and improved operational resilience, OTP rose to 80.3 percent last year. The rollout of new commercial systems has boosted sales, with now 95 percent coming through BA’s own platforms. “I think we are very excited about the new digital capability. It is performing well, but we have more to come in the coming months as we roll out more of its functionalities”, says Doyle. “We have a new revenue management system that is showing encouraging results. So we will see more coming from those levers when we look in 2026 and 2027. But there is still a lot in our transformation that we will unlock in the next couple of years.” For one, BA wants to get more out of the systems on ancillary revenues and is in close contact with Finnair to learn from them. Fleet renewal and fleet growth are other elements of British Airways' recovery. “We will see more aircraft coming back into the air. Today, we are still a bit smaller than in 2019, but we feel we have many opportunities to grow further, which helps with margin growth and fleet commonality. We will complete the rollout of our Club Suite, with the Boeing 787-9s going into the retrofit program this year and the Airbus A380s to follow.” Last year, British Airways ordered 32 Boeing 787-10s. The first one will be delivered in 2029 to replace the 777-200 at London Gatwick. The first 777-9s are due in 2028, said CFO Nicholas Cadbury. The first BA aircraft with StarLink will enter service in March. The North Atlantic is traditionally BA’s most important market. After strong demand in Q1 last year, Q3 was significantly weaker with fewer bookings from Europe to the US. This has improved in Q4 and continues in Q1. “We see strong demand out of the US point of sale, and more broadly, demand in Europe is more resilient. During the Winter Olympics, we saw really strong demand from the US to Italy, and we were able to capitalize that over our hubs”, said Sean Doyle. Group CEO Luis Gallego said: “North Atlantic capacity out of London will continue to be benign. Intra-European capacity out of London is expected to be down in Q1, but up between two and three percent in the second and third quarter.” British Airways will also build back its network to Asia Pacific, where it lagged behind for a few years because of a shortage of aircraft and the after-effects of the pandemic. Capacity grew by 6.4 percent last year. Overall capacity at BA is expected to grow by four percent this year. [caption id="attachment_189686" align="aligncenter" width="580"] Iberia Airbus A321XLR[/caption] Iberia When it comes to the operating margin, Iberia performed best within IAG at 16.2 percent, up 2.6 points year-over-year and exceeding previous ambitions in the "Flight Plan" strategy. Remember that in 2012, the operating margin stood at -7.3 percent. Its operating profit ended at €1.3 billion, up €286 million from 2024 and also closing in on the €1.4 billion mid-term ambition set out last year. Revenues grew 7.2 percent to €8.1 billion. At 24.8 million passengers, it carried 4.1 percent fewer passengers, while capacity/ASKs rose just 0.9 percent to 86.5 million. These numbers exclude low-cost sister LEVEL. Iberia performed well on its traditional strong network out of Madrid to Latin America, confirming the growth in the number of visitors coming to Europe. Especially the Premium market is performing very well. The Airbus A321XLR is now also operating to Fortaleza and Recife in Brazil, delivering the same favourable results as the type gets out from North America. “Whilst there is more capacity now being added by other airlines, Iberia’s competitive cost base, investment in its customers and operational efficiency is delivering exceptional performance”, IAG says in the earnings release. This year, Iberia is looking at an average of five percent capacity growth and five to six percent this summer. Domestic Spain remains a strong market. It will get a boost to the Canary Islands with additional capacity from Iberia Express and Vueling, which have filled the void left by Ryanair after it reduced capacity this winter. CEO Marco Sansavini also identified the effect of recent fatal train accidents in Spain, with more people avoiding trains and now taking domestic flights. Like BA, Iberia is in a transformation program, Plan de Vuelo 2030, that drives organic growth out of Madrid. Sansavini said that his airline has been working with the IAG group to reduce supplier costs, with more to come in the coming months and years. “Another area of efficiency is our utilisation, which has been evolving a lot over the years and has reached very high numbers. But we still see room for improvement with the new fleet. We are not maximising utilisation of the fleet in the first year, but with more Airbus A321XLRs coming, you will see a significant improvement in 2026 in our utilisation and productivity.” Last June, Iberia said that widebody block hours stood at 15.3 per aircraft per day, those for narrowbodies at 9.9 hours. The carrier intends to grow the fleet to around 70 aircraft by 2030. But like many airlines, Iberia and its IAG sisters have suffered from engine issues that resulted in grounded aircraft. Gallego: “We are having problems with the engines, particularly at Iberia. They are suffering from a shortage of spare engines, especially on the A330s. We have issues with the GTF at Vueling, which has some 16 aircraft grounded. And BA has grounded some 787s because of the Rolls issues. We hope that we have recovered in May, as we are in discussions with the different OEMs to improve the situation.” Others Let’s close with a quick look at the other carriers within IAG. Aer Lingus reported a €282 million net profit, up €7 million over 2024, at an 11.1 percent operating margin. It carried 11.3 million passengers, up 2.9 percent, and ASKs were up 6.6 percent to 34.8 million. Capacity growth for 2026 is guided at three percent, but some 10 percent this summer. Spanish low-cost Vueling reported a €393 million net profit, down €7 million yoy. The operating margin was also down, by 0.3 points to 12 percent. Revenues grew by just 0.1 percent to €3.3 million, and passengers carried by 0.1 percent to 38.2 million. Full-year capacity should remain flat this year, but be up five to six percent in the summer. Vuelling recently announced its own strategy update, which targets further growth from its hub in Barcelona and on the domestic network. In 2027, Vueling expects to get the first Boeing MAX 10 to start a six-year fleet transformation from Airbus to Boeing. IAG didn’t disclose financial results for LEVEL, which operates under a standalone AOC that serves North and South America. It carried 899-thousand passengers in 2025, up 6.3 percent. ASKs grew by 9.7 percent to 8.3 million. LEVEL will take delivery of Airbus A330-900s in the coming years to replace older A330s and support growth. IAG's airlines took delivery of 25 aircraft last year. This year, Gallego is hoping for 17 deliveries.

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