The owner of British Airways has launched a new €1.5 billion share buyback after reporting record annual profits, underlining the extent of the airline industry’s turnaround following the pandemic.
The International Airlines Group (IAG), which also includes British Airways, Iberia, Aer Lingus and Vueling, reported a 22 percent increase in profit after tax to 3.34 billion euros for 2025.
Group sales rose by 3.5 percent to 33.2 billion euros, although passenger numbers fell slightly to 121.5 million compared to 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 percent increase in its dividend and unveiled a share buyback program worth €1.5 billion. It follows a €1 billion buyback completed last year and adds to a growing trend of major British companies returning excess cash to investors.
IAG said market conditions remained positive, citing long-term demand growth in its core transatlantic and European markets as well as constrained aircraft supply as manufacturers struggle with delivery delays.
“The market dynamics are compelling, long-term demand growth in our core markets and limited supply in a consolidating industry,” the company said.
Stock buybacks reduce the number of shares outstanding, increase earnings per share, and often support stock price performance. IAG shares, which traded below £1 during the height of the pandemic, are now approaching historic highs, having previously peaked at around 470p in 2018.
The group has taken the decisive step from a crisis-era balance sheet to financial strength. Just over three years ago, IAG was left with almost €20bn of debt when international travel collapsed due to Covid restrictions. Since then, profitability has been restored and debt has been significantly reduced.
IAG chief executive Luis Gallego said the group’s improved profitability was driven by higher margins across airline brands. Iberia achieved an operating margin of 16.2 percent, while British Airways achieved 15.1 percent, both historically strong figures for the group.
“Our margins are significantly better than those of many global competitors,” said Gallego.
Going forward, IAG expects to increase capacity by 2 to 4 percent annually over the next few years. However, supply constraints due to delays by aircraft manufacturers are expected to limit industry-wide expansion and increase pricing power.
The North Atlantic remains IAG’s most important market, although growth has slowed. The group described the route network as increasingly mature, with future expansion expected to be in the low single digits. Demand from U.S. travelers weakened slightly during the summer peak season last year.
In the South Atlantic, however, IAG expects growth in the mid-single-digit range and has a strong competitive position there.
European short-haul flights, which account for more than a third of group capacity, have come under pressure from rising operating costs and weaker demand in parts of northern Europe.
Despite these headwinds, the airline group’s record profitability and higher shareholder returns represent a stark contrast to its precarious position during the pandemic and reinforce investor confidence in the sustainability of demand for premium transatlantic and leisure travel.
