IAG share price: British Airways owner cuts 2026 capacity as fuel bites

International Airlines Group (IAG), the owner of British Airways, Iberia and Vueling, said on Friday, 6 November 2026, that it now expects its flying capacity for 2026 to be slightly lower than last year, as higher fuel costs and disruption linked to the conflict involving Iran weigh on the business. Its third-quarter operating profit before exceptional items came in at 1.73 billion euros, below the 1.81 billion euros analysts had expected. IAG kept its target of an operating margin of at least 12% for 2026, and its shares moved up and down by around 1% in early trading after the results.

Fuel is one of an airline's two biggest costs, alongside staff. When jet fuel prices rise sharply, airlines either raise fares, cut flights that no longer make money, or accept lower profits. IAG is doing some of each: it is flying slightly less, focusing on routes that pay, and holding its margin target. The decision to cut capacity rather than chase growth is a signal of how much the fuel shock is changing airline plans in Europe.

Hedging explains part of the picture. A hedge is a contract that fixes the price of some future fuel purchases in advance. Being 71% hedged for the rest of 2026 protects IAG from part of the price rise this year, but with only 45% covered for 2027, more of next year's fuel will be bought at whatever the market price is then.

For investors, the results were mixed. The profit miss was modest, and the company stood by its margin target, which explains why the shares did not fall sharply. Markets are weighing strong travel demand against higher costs, and IAG's caution on capacity suggests management expects costs to stay high for some time.

For Indian travellers and investors, the story is a reminder of how global fuel prices filter through to air fares. Airlines flying between India and Europe face the same global fuel bill. Indian airlines also buy jet fuel at prices linked to global oil markets, so the same pressures shape their costs and fares.

Peepals calculation: IAG's third-quarter operating profit of 1.73 billion euros was about 4.4% below the 1.81 billion euro consensus (1.73 ÷ 1.81 ≈ 0.956). With 71% of its fuel for the rest of 2026 hedged and 45% for 2027, the share of fuel exposed to market prices rises from 29% to 55%, nearly double (55 ÷ 29 ≈ 1.9). Our calculation from the reported figures.

Short-term: Slightly fewer seats on some IAG routes, especially short-haul European flights at Iberia and Vueling, and continued pressure on fares as fuel costs stay high.

Long-term: If fuel prices stay elevated into 2027, when less of IAG's fuel is hedged, the group may face bigger cost increases and further choices on capacity and fares.

Who is affected: Passengers of IAG airlines such as British Airways, Iberia and Vueling, IAG shareholders, airline staff, airports that depend on IAG traffic, and rival carriers competing for the same routes.

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