International Consolidated Airlines Group Earnings: Strong Results, Record Operating Margin

International Consolidated Airlines Group reported total revenue of EUR 32 billion (up 9% year on year), driven by strong passenger demand, particularly in North America and intra-Europe, with a unit revenue increase of 3.1%. Operating profit was EUR 4.4 billion (up 27% year on year) with operating margin of 13.8%, the best in company history. IAG’s margin expansion was driven by a mix of both higher pricing power and cost efficiencies. The pricing environment remained favorable, especially in premium cabins, while structural cost efficiencies (fleet modernization, artificial intelligence-driven cost controls, and operational improvements) helped maintain high margins. As the group demonstrates its capacity to navigate constrained capacity environment and maintains high passenger revenue yields, we increase our fair value estimate to GBP 4.1 as we update our macro forecast and increase terminal midterm EBIT margin to 11.2% from 10.6% previously.