BA owner expects travel demand to remain ‘strong’ despite Middle East crisis

The owner of British Airways projects that travel demand will remain “strong” despite a drop in first half profits amid the Middle East conflict.

 

International Airlines Group (IAG) reported a 20% fall in net profit to just over €1 billion from €1.3 billion in the first six months of 2025 as revenue edged up by 1% to €16 billion “driven by ongoing strong demand for travel”.

 

The second quarter to June 30 saw revenue up by just 0.2% to €8.8 billion “as increased yields offset a reduction in capacity, negative impact of the Middle East crisis and the timing of Easter”.

 

Lower capacity was flown than in the three months due to the Iran war.

 

IAG said: “In Africa, Middle East and Asia the group reduced capacity by 9.4% (and by 17.4% in Q2) as our airlines (British Airways, Iberia and

Vueling) suspended most of their routes to the Middle East, including the Gulf states as well as Israel and Jordan.

 

“This is now expected to continue for the rest of the year.” 

 

Disciplined cost control partly mitigated the impact of a “significant” fuel price increase as “strong fundamentals” delivered “a robust first half performance despite near-term headwinds,” the company noted.

 

IAG expects the European short-haul market “to continue to see high competitor growth, at least for the remainder of the summer, and we will continue to review capacity for the winter months to protect profitability”.

 

Looking forward, IAG said: “We expect demand for travel across our network to remain strong, as it has done through the recent volatility and over a sustained, multi-year period.”

 

The group’s airlines, which also includes Aer Lingus, are currently around 57% booked for the second half of the year, with booked revenue in line with last year.

 

IAG added: “We expect our long-haul markets to remain positive and short-haul markets to be competitive.

 

“We continue to expect to recover around 60% of the higher fuel cost, through both revenue and cost initiatives, in line with previous guidance.”

 

BA’s transformation “is continuing to make good progress, as new commercial systems drive revenue improvement and

cost initiatives will support future margins,” IAG said.

 

“During the first half it made significant progress with its commercial platform transformation. Ninety per cent of passenger flight journeys are now bookable through the new BA.com website and its new app has been rolled out to 93% of users across Android and iOS platforms, with significant additional functionality to come.

 

“The revenue management and upgraded payments systems implemented in 2025 are delivering revenue positive benefits in line with

expectations.

 

“British Airways is also targeting significant efficiencies across its support functions over the next two years.”

 

A major transformation at Aer Lingus is being enacted “as it takes action to address strategic and cost challenges and to position itself to succeed in the long-term”.

 

The Irish carrier has reduced its flying schedule by 6% to take out lower margin short-haul and long-haul routes “and will look to reduce supplier costs as well as take out fixed costs in head office functions”.

 

Aer Lingus “is also deploying technology that will improve revenue management as well as maintenance and engineering efficiency. With a more efficient and productive platform it can return to IAG margin targets within the next few years and benefit from additional investment from the group to develop its network further”.

 

IAG added: “Both the British Airways and Iberia workforce efficiency programmes have been treated as exceptional costs.

 

“We expect further costs to be incurred by both British Airways and Aer Lingus in the second half of the year.”

 

IAG chief executive Luis Gallego said: "With these results IAG has again demonstrated that its excellent fundamentals are supporting continued value creation for our shareholders, despite the impact of the crisis in the Middle East and wider geopolitical events.

 

"We are well-positioned to deal with these near-term headwinds with a diverse portfolio of world-class brands in large and attractive markets; industry-leading margins; significant free cash flow and a strong balance sheet; and attractive shareholder returns.

 

"Our long-term transformation programme has created the resilience that we are now benefitting from - products and services that our customers value, efficient and punctual operations and a low cost base.

 

“Each of our businesses is very focused on continuing to execute their transformation plans to deliver further long-term benefits.

 

"We remain confident in our business model and strategy that has made us one of the best-performing airline groups in the world."