IAG share price surges on record €4.4bn profit, but business travel outlook dims

British Airways and Iberia owner International Airlines Group (IAG) has reported a 27% rise in operating profit to €4.4 billion (£3.6 billion) for 2024, as high-spending leisure passengers continued to drive strong demand across its core markets.

The announcement sent IAG share price soaring by almost 5% in early trading on Friday.

Revenue for the year rose 9% to €32.1 billion (£26.5 billion), with an 11.4% increase in the final quarter alone.

“We have seen ongoing strong demand for travel throughout 2024 and now into 2025, particularly across our core markets,” said IAG.

The company, which also owns Ireland’s Aer Lingus, said it was delivering “world-class margins and returns” in line with its long-term targets.

Shares in IAG have more than doubled over the past year, buoyed by successive strong financial results and ongoing demand for transatlantic travel.

“Demand for the group’s routes remains strong despite the current pressure on consumers’ incomes,” Aarin Chiekrie, equity analyst at Hargreaves Lansdown says in a note

The company announced a final dividend of six euro cents per share, bringing its total dividend outlay for the year to €435 million (£359 million).

In addition, IAG plans to return up to €1 billion of excess capital to shareholders, adding to the €350 million buyback announced in November.

Business travel will not fully recover to pre-Covid-19 levels, IAG warns

Despite its strong financial performance, IAG warned that business travel may never fully return to pre-pandemic levels.

IAG said “we estimate that it will not fully recover to pre-Covid-19 levels, particularly for short duration and short-haul trips”.

This assessment aligns with industry trends, as major companies—including professional services firms PwC, EY, and Marsh McLennan—continue to cut emissions by reducing corporate air travel.

The head of the Global Business Travel Association previously told the Financial Times last year that business travel had settled into a “new normal” with fewer one-day trips, largely replaced by video meetings.

Leisure travelers fill premium cabins

Since the end of the pandemic, IAG and other major airlines have increasingly relied on high-spending leisure travelers to fill premium-class seats.

The company said leisure travel remained “robust as a major priority for households” and attributed this shift to consumers valuing experiences over material purchases.

“In recent years we have seen this boosted by a shift as customers value experiences over material purchases,” it added.

IAG’s key transatlantic routes, particularly between the UK and the US, continued to drive strong demand.

Operating profit at British Airways rose 14% year-on-year to €2 billion, benefiting from these “highly valuable” routes.

BA faces operational challenges amid aircraft availability concerns

British Airways has struggled with operational issues since the pandemic, particularly at its London Heathrow hub.

While IAG said BA had improved its performance in 2024, the airline continues to face challenges related to aircraft availability.

A major concern remains BA’s fleet of Boeing 787 jets, which have faced ongoing reliability issues due to problems with their Rolls-Royce engines.

IAG cautioned that these challenges could persist in the near term.

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