British Airways owner IAG increases profit and promises returns update in new year

International Consolidated Airlines Group (IAG) reported a Q3 2025 operating profit of €2.05 billion, up 2% year-on-year and largely in line with analyst expectations, despite revenue of €9.33 billion being slightly below consensus and passenger revenue per available seat kilometre declining 2.4%. The British Airways owner maintained its full-year outlook for growth in revenue, profit, and shareholder returns, having increased its interim dividend to €0.048 per share and nearly completed a €1 billion share buyback. IAG plans to provide an update on further shareholder returns with its full-year results in February, leveraging its strong balance sheet with 0.8x net leverage, as travel demand remains robust.

Analysis

IAG reported a Q3 2025 operating profit of €2.05 billion, a 2% year-over-year increase, aligning closely with the €2.06 billion City forecast. While overall revenue was flat at €9.33 billion, slightly below the €9.43 billion consensus, passenger revenue grew €177 million at constant currency. However, passenger revenue per available seat kilometre declined 2.4% at reported rates, indicating some yield pressure despite volume growth.

Despite mixed revenue metrics, IAG maintained its full-year outlook for growth in revenues, profit, and shareholder returns, signaling management confidence. The group's strong balance sheet, evidenced by a low net leverage of 0.8x, provides significant optionality for capital allocation. CEO Luis Gallego emphasized the group's robust position and strong business model.

IAG demonstrated a commitment to shareholder returns by increasing its interim dividend to €0.048 per share and nearing completion of a €1 billion share buyback. The company plans to provide a further update on shareholder returns with its full-year results in February. This forward guidance, coupled with strong travel demand, suggests continued focus on capital distribution.

Key Decisions for Investors

• Investors should monitor IAG's upcoming full-year results in February for further details on capital allocation and potential increases in shareholder returns, given the strong balance sheet and completed buyback.
• Assess the implications of the 2.4% decline in passenger revenue per available seat kilometre against the backdrop of strong travel demand to understand potential pricing power dynamics.
• Evaluate the company's maintained full-year growth outlook in the context of the acknowledged macroeconomic and geopolitical backdrop, considering potential sensitivities to external factors.