International Airlines Group has been flying high so far in 2025, with shares and revenue rising together.
Since the beginning of the year, the British Airways owner’s shares have gained more than 25 per cent, having recovered swiftly from a Trump-tariff related downturn.
Over the past 12 months, shares are up almost 130 per cent, and over the past five they have risen 200 per cent.
And yet, look back further and the firm’s share price resembles the familiar undulation of the Alps seen from 30,000 feet.
That being the case, the drop in altitude seen at the beginning of Covid is something of a sheer cliff edge.
Shares haven’t quite recovered to the highs they were at immediately before global travel shut down almost overnight, and there are tentative rumblings of potential turbulence ahead.
Sky high: IAG shares have risen almost 130 per cent in the past twelve months alone
But performance is positive, and analysts say IAG shares remain undervalued by investors.
Last week, the firm posted double-digit profit gains for the first half of the year, as it boosted capacity on flights to the US despite the threat of tariffs.
IAG – formed in January 2011 after a merger agreement between BA and Iberia, the flag carriers of the UK and Spain respectively – reported revenue increased to €15.9billion in the first half of the year, increasing from €14.7billion a year ago.
Pretax profit, meanwhile, rose to €1.7billion, from €1.0billion a year ago. In its first quarter results, IAG swung to a pretax profit of €239million, compared to a loss of €87million in the first quarter of 2024.
Luis Gallego, chief executive of IAG said: ‘Our strong performance in the first half of 2025 reflects the resilience of demand for travel and the success of our ongoing transformation, underpinned by the fundamental strengths of our group.’
For the whole of 2024, the firm posted revenue of €32.1billion, increasing a healthy nine per cent from €29.5billion the year prior.
This is expected to rise to €33.6billion for the current year, and to €34.8billion the year after.
Pretax profit also rose by 16.6 per cent to €3.6billion, compared to €3.1billion in 2023.
Loredana Muharremi, equity analyst at Morningstar, said: ‘IAG’s margin expansion was driven by a mix of both higher pricing power and cost efficiencies.
‘The pricing environment remained favourable, especially in premium cabins, while structural cost efficiencies (fleet modernization, artificial intelligence-driven cost controls, and operational improvements) helped maintain high margins.’
IAG’s fortunes have changed
The good times experienced by IAG in recent years have not always been so.
Unsurprisingly, the onset of global lockdowns saw IAG suffer tremendously, and shares rapidly tumbled.
Since then, IAG has come a long way in its recovery.
Dan Coatsworth, investment analyst at IAG, said: ‘They’ve nearly recovered all the lost territory. While many stocks are now trading significantly above pre-Covid levels, IAG’s bounce back is better than it looks.
He added: ‘The number of shares in issue has increased by two-thirds since Covid as IAG had to go cap in hand to investors during the pandemic to avoid getting into financial trouble. That means any earnings now have to be split across a much larger pool of shares.
‘Once you look at the headline earnings rather than the share price, you’ll see the business has been making big strides.’
Lale Akoner, global market analyst at Etoro, said: ‘The sharp recovery reflects resilient earnings, strong transatlantic and Latin American demand, and a cleaner balance sheet.
‘A temporary dip earlier this year driven by geopolitical concerns and oil price volatility, proved short-lived as investors refocused on solid fundamentals and strong cash generation.
‘Operational performance continues to surprise to the upside, particularly in premium travel.’
However, while the firm has been on the up more recently, this kind of volatility can play havoc with airline stocks.
Akonder added: ‘The outlook remains positive, but not risk-free.’
Oil price fluctuations are a major headwind for airlines, with fuel being the primary operating expense for the sector.
Big swings in prices can hit profitability, and can make it difficult for airlines to price tickets effectively.
The firm said it expects to spend €7.1billion on fuel over the course of the whole of 2025.
IAG hedges fuel price risk using derivative instruments, which allow them to reduce the negative impact of any fuel price spikes.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, told This is Money: ‘Fuel prices are likely to remain the biggest risk.
‘This issue looks well hedged in the short term, but external shocks could send fuel prices higher again, which would likely weigh on profitability.’
Meanwhile, US leisure travel has softened on the back of tariffs and Middle East capacity has been hit as a result of geopolitical tensions.
Chris Beauchamp, chief market analyst at IG, said last week: ‘”Tariffs” got three mentions in its update, but with new levies announced overnight they are likely to weigh on performance in the months to come.’
Coatsworth said: ‘Appetite has weakened for travel in and out of the US due to political tensions and tariff uncertainty, which presents near-term headwinds for British Airways.
‘Planes are expensive, and profit can evaporate if cabins are half-full.’
He added: ‘Consumers are not making bookings until the last minute, which raises the risk of airlines fighting on price to ensure they get bums on seats.’
Analysts overwhelmingly hold buy or strong buy recommendations for IAG, according to Stockopedia
Should you buy IAG?
The consensus is that IAG is one of the stronger players in the sector.
Chiekrie said: ‘Demand has been holding up well across the sector, and the outlook for air travel is positive. But it’s a difficult industry to make money in, so stock-picking is especially important.
‘We see IAG as a stand-out name in the space thanks to its strong market position, growth prospects and cheap valuation.’
He added: ‘Investors appear to be overlooking IAG, given that the airline industry has historically been a difficult place to make money. But IAG is a cut above most of the other network airlines.’
Analysts largely hold IAG as a strong buy, with eight of 23 broker ratings analysed by Stockpedia recommending the stock, while a further five rated IAG as a buy.
Beauchamp said: ‘IAG is another one of those stories this year of staid FTSE 100 companies that have seen huge rebounds in the share price, up 130 per cent over the past year in this case. And like so many recently, the numbers appear good enough to justify the surge.’
However, he added: ‘a look at the chart shows that, once the shares cross 400p, the going gets much tougher.’
With shares on the cusp of hitting 380p, IAG isn’t far off this milestone. It remains to be seen if it can sustain a share price north of 400p.
Yet this valuation still looks cheap, Chiekrie maintains.
He said: ‘Performance at British Airways is impressive, and the group has exposure to the booming Madrid-Latin America route through its second-largest airline, Iberia.
‘A strong balance sheet and generous cash returns for shareholders make the current valuation look far too cheap, compared to both the long-run average and its peers.’
Etoro’s Akoner echoes this. She said: ‘We think that investors are not fully pricing in the earnings potential from margin expansion and fleet upgrades.
‘The industry is entering a steadier phase, less about rebound. Carriers with strong networks and financial flexibility are best placed to benefit.’
‘While overall growth may be slower, the business model is more focused and capital-efficient than pre-Covid. Cost control is tighter, debt is down, and exposure to premium routes is paying off.’
She added: ‘The discount to pre-pandemic levels leaves room for a re-rating if execution holds and travel demand stays steady.’
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