British Airways owner IAG reported better than expected annual profit on Friday, helped by lower fuel costs and demand strength on core transatlantic routes and in premium cabins.
European airlines have been buoyed by premium demand across the North Atlantic, a sector-wide trend in which affluent travellers continue to spend even as US demand for economy fares has softened.
IAG has been a European leader in recent years thanks to strengthened transatlantic links in North and South America. However, price-sensitive travellers have pulled back against a backdrop of tariff-related uncertainty and shifting US demand signals.
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The group warned in November of weakness in the economy segment of the transatlantic market, sending its share price lower.
“Since Q3 we have seen a rebound,” chief executive Luis Gallego told a media call, adding that premium and corporate demand were performing particularly well at British Airways and that bookings for the first quarter of 2026 were strong.
The shares have since recovered, but IAG has lost top spot for share-price growth to Air France-KLM, shares in which have jumped by 50 per cent in the past year. IAG shares are up 36 per cent over the same period.
Other European carriers are also benefiting from robust demand at the top end of the market, with Lufthansa rolling out new premium seats and Air France enhancing premium products through upgraded cabins, lounges and onboard services.
IAG reported operating profit before exceptional items of €5.02bn euros ($5.93bn), slightly ahead of the €4.97bn forecast by analysts polled by LSEG and up 13 per cent year on year.
The company said on Thursday that it would return €1.5bn to shareholders over the next 12 months, starting with a €500m share buyback to be completed by the end of May.
It added that it expected capacity growth of about 3 per cent, with no delivery delays projected from planemakers Airbus and Boeing.
Finance chief Nicholas Cadbury told reporters there was still little visibility for the second and third quarters, explaining why the group did not provide a more detailed outlook, and there was some weakness in the Africa and Middle East region.