IAG: Robust outlook but trimming estimates for higher fuel. Removing from AFL after outperformance despite continued ME volatility

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IAG: Robust outlook but trimming estimates for higher fuel. Removing from AFL after outperformance despite continued ME volatility

J P M O R G A N Europe Equity Research

04 August 2026

IAG

Robust outlook but trimming estimates for higher fuel. Overweight

Removing from AFL after outperformance despite ICAG.MC, IAG SM

continued ME volatility Price (03 Aug 26):€5.06

▼Price Target (Dec-27):€5.75

Prior (Dec-27):€6.00

We take our IAG EBIT estimates down by -6%/-5%/-4% post Q2 results due to

lower capacity and higher fuel, and we now forecast 2026 EBIT at €4.54bn. Our European Transport & Logistics

key takeaways from the results were: (1) IAG is expecting to maintain similar Harry J Gowers AC

RASK growth for the remainder of the year compared to Q2 with long-haul (44-20) 7134-7522

continuing to show solid demand. (2) Capacity guidance has been cut mainly due harry.gowers@jpmorgan.com

J.P. Morgan Securities plc

to a slow resumption in ME flying, however, this may continue to support pricing

Alexia Doganithrough the back half. (3) Despite ME-related volatility and a large increase in fuel

(44-20) 3493-3791

costs, IAG is still expecting to be within its 12-15% EBIT margin range this year, alexia.dogani@jpmorgan.com

which would be the highest margins in our coverage, and lead to significant FCF J.P. Morgan Securities plc

generation. We remain OW, given in-tact fundamentals and continued robust long- Bhavpreet S Batra

haul demand which can lead to FCF generation significantly ahead of peers. (91-22) 6157-5046

However, IAG is up 7% YTD despite the continued Middle East-related volatility, bhavpreet.batra@jpmorgan.com

and has outperformed the sector (ex-easyJet), but with our 2026 EBIT estimate J.P. Morgan India Private Limited