Key points

• Revenues rise almost 10% in Q1

• Operating profits more than doubled

• Confirms order for Boeing, Airbus

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IAG profits rise as core markets look strong

IAG reported Q1 revenue growth of 9.6%, which combined with lower fuel prices offset expected cost increases to lift operating profit by €130 million to €198 million. Operating margin increased by 1.7 pts to 2.8%.

Whilst the company noted geopolitical and macroeconomic uncertainty, it’s continuing to see good demand for air travel across core markets. Latin America and Europe is strong and the key North Atlantic market robust, with management noting strength in premium cabin mitigating some recent softness in US economy leisure.

As of 6 May IAG is around 80% booked for the second quarter, with revenue ahead of last year, and 29% booked for the second half, broadly in line with last year. Given the sentiment was low due to tariffs and worries about the US consumer, these numbers suggest the outlook is better than feared.

Boeing, Airbus Order Update

IAG also said it will order 53 new Airbus and Boeing aircraft for its long-haul fleet, comprising32 Boeing 787-10 aircraft for British Airways and 21 Airbus A330-900neo aircraft. IAG also has an option on 10 more Boeing and 13 more Airbus jets as part of the order.

Share prices struggle against macro backdrop

Airline stocks have been under pressure from a range of issues, from soft consumer trends in the US which saw a number of major US airlines cut guidance at the end of Q1, to the tariffs and broad macroeconomic uncertainty that saw the likes of American Airlines (-35% YTD) pull guidance altogether and United Airlines (-17% YTD) offer two scenarios for the year ahead. Delays in aircraft deliveries hasn’t helped.

ATC upgrade plans send stocks up

On Thursday, the US government announced plans to spend “tens of billions” of dollars to upgrade the nation’s creaking air traffic control system. That news sent shares of United Airlines, Delta Air Lines (-17% YTD) and American Airlines Group sharply higher. Budget carriers like Southwest Airlines (-7% YTD) and Alaska Air Group also bounced.

US Transportation Secretary Sean Duffy said the government would push to improve infrastructure, staffing shortfalls and failing technology.

IAG shares rose about 2% on Friday after earnings, and are moving close to flat for the year after a turbulent period for the industry. Could this be a sign of an improving outlook for the sector?