Airlines are accustomed to turbulence. Few, however, have experienced a swing as violent as that endured by International Consolidated Airlines Group. Five years ago the owner of British Airways, Iberia, Aer Lingus and Vueling was burning through cash as borders closed. In 2025 it reported the strongest results in its history.

Operating profit before exceptional items rose by 13.1% to €5.02bn, up from €4.44bn the year before . Revenues increased by 3.5% to €33.2bn. Profit after tax climbed to €3.34bn from €2.73bn . The group's operating margin improved to 15.1% , placing it at the top of its medium-term target range.

The improvement is not merely optical. Adjusted earnings per share rose by 22.4% to 69.5 euro cents . Return on invested capital reached 18.5%, compared with 17.3% in 2024 . Net debt fell to €5.95bn, reducing leverage to just 0.8 times EBITDA: a conservative position for a business long known for fragile balance sheets.

For investors who once viewed airlines as serial value traps, that combination of high margins and low leverage marks a notable shift.

Demand holds, discipline prevails

The year's performance was built less on exuberant expansion than on measured growth. Capacity, measured in available seat kilometres, increased by 2.4%. Passenger revenue per seat was broadly flat over the year, indicating stable pricing rather than a fare boom.

Load factors eased slightly. Across the group they slipped by 0.9 percentage points to 85.6%. On the vital North Atlantic market they fell by 1.6 points to 83.5%, reflecting softer American leisure demand in parts of the year.

Yet other regions compensated. Latin America and the Caribbean, where Iberia enjoys a strong competitive position, saw load factors rise to 88.9%, up 0.6 points. Meanwhile, lower fuel prices helped margins: fuel and emissions charges declined by 6.9% compared with 2024.

Beyond ticket sales, IAG's "other revenue", which includes maintenance operations and its loyalty business, rose by 16% to €3.01bn. Such asset-light activities generate attractive returns and smooth the volatility inherent in flying passengers across oceans.

The group argues that industry conditions remain favourable. Aircraft-delivery delays at manufacturers are constraining global supply, limiting aggressive capacity expansion. IAG itself plans to grow capacity by roughly 2-4% annually in the medium term. If demand continues its steady climb, modest growth may suffice to sustain healthy pricing.

Cash returns and cautious optimism

Robust profitability has translated into cash. Free cash flow reached €3.15bn in 2025, even as capital expenditure increased. That has allowed management to reward shareholders more generously.

The group announced €1.5bn in shareholder returns over the next 12 months, starting with a €500m share buyback . A final dividend of €0.05 per share has been proposed, taking the full-year payout to €0.098, up from €0.09 the previous year.

At around 460p per share, IAG trades on a modest multiple of its earnings, reflecting aviation's cyclical nature. The company itself highlights risks ranging from supply-chain disruption to geopolitical instability. Airlines remain exposed to forces beyond their control: fuel prices, economic downturns and political shocks.

Even so, IAG enters 2026 from a position of unusual strength. High margins, disciplined capital allocation and a strengthened balance sheet suggest a company no longer merely recovering, but redefining itself.