The owner of British Airways has launched a fresh €1.5 billion share buyback after reporting record annual profits, underlining the scale of the post-pandemic turnaround in the airline industry.
International Airlines Group (IAG), which also owns British Airways, Iberia, Aer Lingus and Vueling, reported a 22 per cent rise in profit after tax to €3.34 billion for 2025.
Group revenues climbed 3.5 per cent to €33.2 billion, despite passenger numbers edging down slightly to 121.5 million compared with the previous year. The improvement was driven by stronger pricing and higher revenue per passenger rather than volume growth.
In response, the FTSE 100-listed airline group announced an 8.9 per cent increase in its dividend and unveiled a €1.5 billion share buyback programme. It follows a €1 billion buyback completed last year and adds to a growing trend of large UK corporates returning surplus cash to investors.
IAG said market conditions remained supportive, citing long-term demand growth across its core transatlantic and European markets, combined with constrained aircraft supply as manufacturers struggle with delivery delays.
“Market dynamics are compelling, long-term demand growth in our core markets and constrained supply in a consolidating industry,” the company said.
Share buybacks reduce the number of shares in circulation, increasing earnings per share and often supporting share price performance. IAG’s shares, which were trading below £1 during the depths of the pandemic, are now approaching historic highs, having previously peaked at around 470p in 2018.
The group has moved decisively from a crisis-era balance sheet to financial strength. Just over three years ago, IAG was carrying close to €20 billion of debt as international travel collapsed under Covid restrictions. Since then, it has restored profitability and significantly reduced leverage.
Luis Gallego, IAG’s chief executive, said the group’s improved profitability was underpinned by higher margins across its airline brands. Iberia delivered an operating margin of 16.2 per cent, while British Airways achieved 15.1 per cent, both historically strong levels for the group.
“Our margins are significantly better than those of many global competitors,” Gallego said.
Looking ahead, IAG expects to grow capacity by between 2 and 4 per cent annually over the next few years. However, it anticipates that supply constraints, driven by delays from aircraft manufacturers, will limit industry-wide expansion, supporting pricing power.
The North Atlantic remains IAG’s most important market, although growth has moderated. The group described the route network as increasingly mature, with future expansion likely to be in the low single digits. Demand from US travellers softened slightly during the summer peak season last year.
By contrast, IAG expects mid-single-digit growth in the South Atlantic, where it holds a strong competitive position.
Short-haul European operations, which account for more than a third of group capacity, have faced pressure from rising operating costs and weaker demand in parts of northern Europe.
Despite those headwinds, the airline group’s record profitability and enhanced shareholder returns mark a striking contrast to its precarious position during the pandemic, and reinforce investor confidence in the durability of premium transatlantic and leisure travel demand.
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IAG unveils €1.5bn share buyback after record profits at British Airways owner