IAG Shares Dip Despite Record €5bn Profit: Is the “Premium Surge” Priced In?

International Airlines Group (IAG), the parent company of British Airways, Iberia, and Aer Lingus, officially released its full-year 2025 report during the European morning session on Friday, February 27, 2026. While the headline figures were “masterclass” levels of performance, the stock experienced a classic “sell the news” event. At the open, shares were down over 1%, eventually sliding further to 435.7p (down 4.72%) during the London session.

The drop was largely attributed to a cautious outlook from Finance Chief Nicholas Cadbury, who noted “little visibility” for the second and third quarters of 2026. Additionally, while premium demand is surging, the group warned of continued pressure in the price-sensitive economy segment across the North Atlantic.

Deep Dive into IAG’s Record-Breaking Financial Velocity

The 2025 fiscal year was a milestone for IAG, marked by a sharp rise in profitability and a massive return of capital to its investors. Despite a slight dip in free cash flow, the company’s ability to generate cash from its core operations remains its strongest competitive moat.

• Revenue & Profit Surge: Total revenue climbed 3.5% to €33.21 billion, pushing operating profits up 13.1% to a record €5.02 billion.
• Efficiency & Earnings: Operating margins improved to 15.1%, while adjusted earnings per share (EPS) rocketed 22.4% to reach 69.5 € cents.
• Resource Management: Return on invested capital grew to 18.5%, reflecting highly efficient asset use despite a slight drop in free cash flow to €3.1 billion.
• The €1.5 Billion Payday: Shareholders are set for an 8.9% dividend hike alongside a fresh €1.5 billion cash return plan, which kicks off with an immediate €500 million share buyback.

Key Drivers of IAG’s Success

The group’s “exceptional” year was fueled by long-term demand growth in core markets where supply remains tight. By focusing on strategic execution, balancing customer service with shareholder returns, IAG maintained high operational performance and disciplined cost management.

IAG 4-Hour Chart Analysis

The technical picture for IAG (LON: IAG) shows a sharp rejection at the 464.3p resistance level following the earnings release. The price action has now returned to a critical consolidation zone.

• Immediate Resistance (457.3p – 464.3p): This is the “Wall of Supply.” IAG needs a daily close above 460p to invalidate the current bearish engulfing candle and restart the move toward the 500p psychological handle.
• Crucial Support (429.9p – 435.0p): The stock is currently testing the 435p level. If this floor fails, analysts expect a deeper wash-out toward the 420p area, which acted as a major demand zone in early February.
• The Trend: Despite today’s 4.7% drop, the medium-term trend remains “neutral-to-bullish,” as the price holds well above the December lows of 370p.

Premium Travel Demand Drives IAG Profit Growth

CEO Luis Gallego emphasized that IAG is successfully “rebuilding its premium capacity to pre-pandemic levels”. While economy flyers are pulling back amidst tariff-related uncertainty, affluent travelers are continuing to spend, allowing IAG to achieve margins that Gallego claims are “significantly better than those of our global competitors”.

• The Iberia Factor: Iberia delivered a standout 16.2% margin, supported by its dominant position in the South American market.
• British Airways Transformation: BA accounts for nearly 45% of group profits, with a 15.2% margin.
• Sustainability: The company remains committed to net-zero by 2050, having delivered 25 latest-generation, fuel-efficient aircraft in 2025 alone.

IAG Share Price Outlook: Strategic Reset or Emerging Value Trap?

IAG has delivered a fundamentally flawless report, but the stock is currently a prisoner of “macro-anxiety.” The failure to hold the 460p level today suggests that investors are worried about the sustainability of premium spending if global trade tariffs escalate further in 2026.

My Analytical Take: The €1.5 billion buyback provides a solid floor for the stock. I expect IAG to consolidate between 430p and 450p over the next few sessions. If the company can prove during its March investor day that transatlantic bookings for the summer peak are holding firm, we will likely see a rapid re-test of the 480p resistance.