International Airlines Group (IAG), the parent company of British Airways, Iberia, Aer Lingus, and Vueling, has taken center stage this week after announcing a sweeping €1.5 billion share buyback program and reporting record-breaking annual profits for 2025. The move, unveiled on February 27, 2026, highlights a remarkable turnaround for the airline giant, which only a few years ago was grappling with the fallout from the global pandemic and massive debt burdens.
According to The Times, IAG’s profit after tax soared by 22% to €3.34 billion for 2025, while group revenues climbed 3.5% to €33.2 billion. Despite a slight dip in total passenger numbers—down to 121.5 million from the previous year—the company’s financial performance was buoyed by stronger pricing and higher revenue per passenger, rather than sheer volume growth. This dynamic, as IAG explained, reflects “compelling market dynamics, long-term demand growth in our core markets and constrained supply in a consolidating industry.”
The company’s decision to increase its dividend by 8.9% and initiate a fresh €1.5 billion share buyback follows a €1 billion buyback completed in 2025. Share buybacks are often used to reduce the number of shares in circulation, which can boost earnings per share and support the share price—a strategy that seems to be working, as IAG shares are now approaching historic highs. It’s a far cry from the pandemic era, when shares traded below £1 and the group was saddled with nearly €20 billion in debt. Now, with net leverage at just 0.8x, IAG has restored profitability and financial strength, as reported by Invezz and Interactive Investor.
Chief executive Luis Gallego was keen to underscore the group’s operational improvements. “We reported another year of exceptional performance in 2025, delivering for our customers with continued improvements in ontime performance and customer satisfaction… Execution of our strategy and transformation programme is creating value for shareholders,” Gallego told reporters. He pointed to historically strong operating margins—16.2% for Iberia and 15.1% for British Airways in 2025—well above many global competitors.
The group’s robust performance wasn’t just a fluke of numbers. According to Gulf Business, IAG’s operating profit before exceptional items hit €5.02 billion, up 13% year on year and slightly ahead of analyst forecasts. The company credited lower fuel costs and persistent demand for premium travel, especially across transatlantic routes, as key drivers of its success. Even as US demand for economy fares has softened, affluent travelers have continued to fill premium cabins, a trend echoed across the sector with rivals like Lufthansa and Air France investing in upgraded premium products.
Despite these gains, there are still pockets of uncertainty. Finance chief Nicholas Cadbury noted there was “little visibility” for the second and third quarters of 2026, with some weakness in the Africa and Middle East regions. Still, bookings for the first quarter of 2026 remain strong, especially for premium and corporate travel at British Airways. IAG expects to grow capacity by about 3% in 2026, and for now, no delivery delays are projected from major aircraft manufacturers Airbus and Boeing—a notable shift from the supply constraints that have plagued the industry in recent years.
Looking ahead, IAG’s strategy appears to focus on measured expansion, with plans to grow capacity by 2–4% annually over the next few years. The North Atlantic remains its most important market, though growth there has moderated and is expected to remain in the low single digits. By contrast, the South Atlantic offers brighter prospects, with mid-single-digit growth expected and IAG holding a strong competitive position. Short-haul European operations, which make up more than a third of group capacity, have faced pressure from rising costs and weaker demand in parts of northern Europe, but the group’s overall profitability remains robust.
From a shareholder’s perspective, the news has been largely positive. IAG’s adjusted earnings per share jumped by 22.4% to 69.5 euro cents, and free cash flow, while slightly down from the previous year, still reached a hefty €3.1 billion. The company’s return on invested capital improved to 18.5%, up from 17.3%. As Interactive Investor notes, analysts and investors alike have been watching these fundamentals closely, especially with macroeconomic conditions in an uptrend—though there’s a note of caution as inflation expectations, which had buoyed the stock, have recently rolled back. EyeQ analysis, cited by Interactive Investor, gave IAG a macro relevance score of 71% and a model value of 432.45p, with the stock trading at a slight premium to its model value. The takeaway? Macroeconomic factors are broadly supportive, but investors should keep an eye on inflation trends and central bank policy, as these could influence future performance.
Despite the good news, not everyone is convinced the rally will continue unchecked. As Invezz reported on February 26, just ahead of IAG’s announcement, the share price had formed a “risky pattern” in the stock market, with some investors wary of potential retreats. The modestly rich valuation relative to macro conditions suggests that while there’s no immediate cause for alarm, much of the good news may already be priced in.
Still, IAG’s management is pushing ahead with ambitious plans. The company expects non-fuel unit costs to decline by around 1% in 2026, helped by favorable foreign exchange rates. It also remains committed to sustainability, aiming for net-zero emissions by 2050. In 2025, IAG’s carbon intensity reached 77.5gCO2 per passenger kilometer, thanks in part to increased use of sustainable aviation fuel and delivery of 25 new, more fuel-efficient aircraft. Capital expenditures are projected at around €3.6 billion, depending on fleet deliveries, and the group has pledged to maintain a sustainable ordinary dividend.
Meanwhile, the broader airline sector is experiencing similar trends. European carriers like Air France-KLM and Lufthansa have also benefited from robust demand for premium travel, with Air France-KLM even outperforming IAG in share-price gains over the past year. IAG shares have risen 36% in that period, while Air France-KLM’s have soared by 50%.
In the end, IAG’s record results, enhanced shareholder returns, and strategic investments in sustainability and capacity growth mark a striking contrast to its precarious position during the pandemic. The group’s ability to navigate ongoing market uncertainties while delivering value to shareholders will be closely watched in the months ahead.
For now, investors and industry watchers alike can’t help but marvel at how far IAG has come—and wonder just how high it might fly next.