International Airlines Group (IAG), the parent company of British Airways, Iberia, Aer Lingus, and Vueling, has announced a significant 20% increase in annual pre-tax profits to €4.5 billion (£3.9 billion) for 2025, even as passenger numbers experienced a slight decline. The group carried 121.6 million passengers last year, down 0.4% from 122 million in 2024, yet achieved record operating profits with margins exceeding 15% at both British Airways and Iberia.
Robust Transatlantic Market Drives Financial Success
IAG Chief Executive Luis Gallego attributed the strong financial performance to the lucrative transatlantic market, which remains robust despite earlier warnings of softening demand. Gallego emphasized that premium leisure bookings on North American routes for 2026 are performing "very well," indicating continued strength in this key sector. British Airways, as the main profit contributor within IAG, operates approximately half of all flights from Heathrow Airport.
Heathrow Expansion Concerns Highlighted
During an investor call, Gallego issued a cautionary statement regarding Heathrow's third runway plans, which have received government backing but are projected to cost £49 billion with associated expansion expenses. He stated that while IAG supports growth initiatives, the costs must be significantly reduced to maintain Heathrow's global competitiveness. This warning comes amid ongoing debates about infrastructure investment in the aviation industry.
Operational Improvements and Future Outlook
Gallego described 2025 as "another year of exceptional performance," noting improvements in punctuality and customer satisfaction across the group. Looking ahead, he expressed optimism about strong demand, citing research and market data that suggest travelers in core European and transatlantic markets remain committed to flying at similar or increased levels in 2026. IAG plans to raise its capacity by approximately 3% this year to meet this anticipated demand.
Shareholder Returns and Market Reaction
The group reported a 3.5% increase in revenue alongside its record operating profits. IAG will return value to shareholders through a total dividend of €448 million for 2025 and announced an additional €1.5 billion share buyback program, following a €1 billion buyback in February. Despite these positive financial indicators, IAG shares fell by about 6% on Friday, reflecting market volatility or investor concerns about future challenges.
Gallego concluded that IAG's strategic focus on premium routes and operational efficiency has positioned the group for sustained success, even in a fluctuating passenger environment. The aviation giant continues to navigate industry pressures while capitalizing on high-margin travel segments.
