
IAG Q2 profits fall as Aer Lingus loss and fuel costs weigh; Vueling to get first 737 Max jets
Airline group will keep capacity flat in 2026 but sees strong premium demand and cost-savings for Vueling as it transitions to 737 Max fleet. IAG's operating and net profits fell by a quarter and one-third, respectively, in the April-June period, as a loss-making Aer Lingus and higher fuel costs took a toll. But the group is confident it can deliver a full-year operating margin within its 12-15% target, pointing to the benefits of its transformation programme, "robust" demand, strong balance sheet and recovery of 60% of its additional fuel costs through revenue growth and cost initiatives. IAG's second-quarter operating profit dropped to €1.26 billion ($1.45 billion) from €1.68 billion in the same period last year, while net profit fell to €732 million from €1.13 billion. Revenue stayed relatively flat at €8.88 billion, as fuel costs and emissions charges soared almost 23%. Revenue at IAG Cargo declined 9.4% in the first half, reflecting “reduced capacity resulting from disruption in the Middle East”, says the group. British Airways turned in the strongest performance in the first six months of 2026, with operating profit before exceptional items coming in €61 million higher than the same period last year, reaching €885 million. However, Aer Lingus stood out as the only carrier in the group to report a first-half operating loss. IAG attributes this to "the combination of additional fuel costs and lower passenger revenues linked to competition on North Atlantic routes". Aer Lingus cuts Aer Lingus said earlier this month it would reduce capacity by 6% later this year , axe three US routes and cut jobs amid increased transatlantic competition. Speaking on IAG's first-half earnings call on 31 July, Aer Lingus chief executive Lynne Embleton said she was confident the carrier could eventually reach the group's 12-15% margin goal and attract investment for new aircraft, but it would take time. "As part of this group, if we want investment we need to be at 12-15% as well," says Embleton. "We do believe we can get to the 12% operating margin – some steps are quicker than others. We believe we can take cost action quickly but we believe the impact from things like premium economy and the business investment will take a little longer to come through. "If we can demonstrate that we're getting our house in order and we can get very close to that investable margin then I'd hope that new-generation aircraft would lift us over the hurdle, because there are certainly efficiencies from having new-generation aircraft." She adds: "We do believe we can get there – we don't think it's an immediate solution but there's certainly a pathway that we believe we can give confidence to the group." Vueling prepares to take first 737 Max jets IAG will take delivery of 13 aircraft in the second half of this year – including the first three Boeing 737 Max 8-200 jets that will begin low-cost unit Vueling's transition to an all-Boeing narrowbody fleet . "We are looking forward to the first of 60 737 deliveries to Vueling at the end of the year," said IAG chief executive Luis Gallego during the earnings call. Transitioning to the 737 Max will deliver a "significant" reduction in cost at Vueling, adds Gallego, noting that it will be "the first low-cost carrier in Europe" to offer SpaceX's Starlink in-flight wi-fi service, which will be installed on the new jets. The other aircraft deliveries planned for this year include six Airbus A320neos, six A321neos and two Boeing 787-10s. IAG received three aircraft in the first half of the year – one A320neo and two A321XLRs. It is due to receive the last A321XLR from its firm orderbook "soon", says Gallego, but it holds options on more of the type, and is "considering if we want to have more aircraft and where". Full-year capacity across IAG is expected to be flat, after coming in 0.1% lower year-on-year in the first half as a result of being forced to suspend Middle East routes. "Growth was lower than the original plan of approximately 2.5%, linked to cancellations due to the conflict in the Middle East, together with aircraft availability linked to engines," says IAG. The airline group is seeing some "softness" in the intra-European market, but points to strong premium demand – particularly on transatlantic routes – which is helping it recapture 60% of its additional fuel costs. IAG is 70% hedged for the remainder of this year and 40% hedged in 2027. The group says demand remains "robust" and 57% of its second-half revenue is booked, which Gallego says is "in line with last year".




















