By Elena Vasquez

IAG’s pre-tax profit fell 16% to €3bn in the nine months to September as jet-fuel and emissions spending rose 19% from a year earlier to €6.4bn, exposing the airline group to a sharper cost shock in 2027.

The London-listed owner of British Airways, Vueling and Aer Lingus attributed the decline to a “significant increase in jet fuel prices from March onwards.” The rise followed the closure of the Strait of Hormuz after the outbreak of war in the Middle East, which disrupted shipping and oil exports.

At €6.4bn, IAG’s nine-month fuel bill, including emissions charges, was more than twice its €3bn pre-tax profit. The contrast shows why an increase of 19% in fuel spending can outweigh the benefit of 4.5% revenue growth in the third quarter.

Luis Gallego, IAG’s chief executive, cited the “very high price of jet fuel” in his Friday statement to shareholders. Industry bosses have warned that prices at that level could force some airlines into collapse next year, even though airlines have mostly kept passenger energy costs contained so far this year.

Airlines have also warned that fuel prices will keep rising into next year and push costs onto passengers. Their main near-term defence is hedging, the use of fixed-price contracts for energy requirements, but the share of fuel that can be bought at fixed prices will fall significantly in 2027.

What pushed IAG’s profit lower?

The timing matters because average commodity fuel prices began climbing at the end of February 2026, while airlines had already fixed much of their near-term supply. As contracts roll off, a larger portion of purchases moves onto higher market prices.

IAG said its 19% fuel-cost increase was “driven principally by a significant increase in average commodity fuel prices from the end of February 2026 onwards.” The company linked that rise to the Middle East conflict and to disruption to shipping and oil exports through the Strait of Hormuz.

How much fuel protection disappears in 2027?

IAG has hedged about 70% of its fuel requirements in the current financial year, but only 45% for 2027. That 25-percentage-point reduction leaves a larger share exposed to the commodity prices that began rising from the end of February 2026.

• IAG: Hedged fuel falls from about 70% of the current financial year’s requirements to 45% for 2027, a 25-percentage-point decline.
• Ryanair: About 80% of this year’s fuel is hedged at €67 per barrel, but protection falls to 25% at about €95 per barrel from next year, a 55-point reduction.

Ryanair’s disclosed next-year hedge price of about €95 per barrel is €28 above its current-year €67, while its protected volume shrinks by 55 percentage points. The new coverage rates leave 55% of IAG’s 2027 requirement and 75% of Ryanair’s unhedged.

The lower protection matters because airlines have used hedges to hold passenger prices steady while energy costs climb. With less fixed-price fuel available, the industry faces a larger pass-through of market prices into ticket costs in 2027, the period in which bosses have warned some airlines could collapse.

Ryanair said this week that it is considering pay freezes and AI efficiency drives to absorb €2bn in higher fuel costs next year. The proposal targets the carrier’s cost base as 75% of next year’s fuel remains outside its disclosed hedge.

Can customer demand absorb the shock?

Gallego said IAG’s airlines are benefitting from “robust” customer demand, as revenue grew 4.5% to €9.7m in the third quarter. Revenue growth provided a partial offset to the 19% increase in fuel and emissions spending.

The board also raised the dividend by 10% to €0.053 per share. The increase came alongside a 16% fall in nine-month pre-tax profit and lower hedge cover for 2027.

Demand and hedging remain the near-term buffers, but 45% coverage at IAG and 25% at Ryanair leave airlines less insulated as fuel prices rise into 2027, raising the risk of higher passenger costs.