IAG announces €1.5bn share buyback after record profit in British Airways owner
The owner of British Airways has launched a new 1.5 billion euro dividend payout after reporting annual profits, underscoring the magnitude of the post-pandemic turnaround in the airline industry.
International Airlines Group (IAG), which owns British Airways, Iberia, Aer Lingus and Vueling, has reported a 22 percent increase in profit after tax to €3.34 billion in 2025.
The group’s revenue rose by 3.5 percent to €33.2 billion, despite passenger numbers falling slightly to 121.5 million compared to last year. This development is driven by strong fares and higher revenue per passenger rather than capacity growth.
In response, the FTSE 100-listed airline group announced an 8.9 percent increase in its budget and unveiled a plan to buy back 1.5 billion shares. It follows a €1bn bailout completed last year and adds to a growing trend of large UK companies returning cash to investors.
IAG said market conditions remained supportive, citing long-term demand growth across its transatlantic and European markets, combined with tight aircraft supply as manufacturers grappled with delivery delays.
“Market forces are compelling, long-term demand growth in our core markets and limited supply in the aggregate 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 were trading below £1 during the height of the pandemic, are now approaching historic highs, having reached around 470p in 2018.
The group has moved from a crisis-era balance sheet to financial strength. Just over three years ago, IAG was carrying nearly €20 billion in debt as international travel fell under Covid restrictions. Since then, it has returned profits and significantly reduced power.
Luis Gallego, IAG’s chief executive, said the group’s improved profitability was based on higher levels across all aircraft types. Iberia delivered a performance rating of 16.2 percent, while British Airways scored 15.1 percent, both historically strong levels for the group.
“Our score is much better than most of our competitors in the world,” said Gallego.
Looking ahead, IAG expects to increase capacity by between 2 and 4 percent annually over the next few years. However, it expects 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 slowed. The group described the route network as growing exponentially, and future growth could be in the low single digits. Demand from American travelers has softened slightly during the peak summer season last year.
In contrast, IAG expects mid-single digit growth in the South Atlantic, where it holds a strong competitive position.
European short-hair operations, which comprise more than a third of the group’s capacity, have faced pressure from rising operating costs and weak demand in parts of northern Europe.
Despite those storms, the airline’s record of profitability and improved shareholder returns show a marked contrast to its crisis-era situation, and bolster investor confidence in the strength of demand for premium transatlantic and leisure travel.
