IAG Soars to Profit as Travel Demand Takes Flight – Is This a Buy?

The airline industry has been a rollercoaster since the pandemic, but International Consolidated Airlines Group (IAG) is finally hitting the high notes. Let me break down why its Q1 2025 results are a game-changer for investors—and whether you should jump on this stock.

Profit Skyrockets—No More Losing Altitude

IAG didn’t just meet expectations; it crushed them. Revenue jumped 9.6% to €7.0 billion, while operating profit more than tripled to €198 million—a 191% surge year-on-year. The key? Resilient demand and cost discipline. Fuel prices dipped just in time, but the real win was in premium cabins and North Atlantic routes, where passenger revenue per seat kilometer spiked 13%.

This isn’t a flash in the pan. As of May, IAG is 80% booked for Q2, with revenues already ahead of 2024 levels. And while domestic U.K. and Spanish routes lagged, Latin America and Europe are firing on all cylinders. The takeaway? Global premium travelers are back in force, and IAG is cashing in.

Fleet Modernization: Betting Big on the Future

IAG isn’t just sitting on its profit. It’s placing massive bets on the next decade with 53 new aircraft orders (including Boeing 787-10s and Airbus A330-900neos) through 2033. These planes aren’t just for show—they’re 25% more fuel-efficient than older models, cutting costs and emissions. With 18 existing orders (like Airbus A350s) set to arrive by 2030, IAG is future-proofing its fleet.

The tell a clear story: while the stock has lagged year-to-date, the Q1 results sent it up 1.4% on the news. But is this enough? Let’s dig deeper.

Cargo: The Secret Weapon You’re Missing

While passenger demand is strong, IAG’s cargo division is a hidden gem. Revenue jumped 12.4% to €318 million, fueled by high-yield routes like Asia Pacific and the Middle East. With 7.5% growth in cargo tonne kilometers, this segment is outperforming the broader market’s 2.4% rise. Why does this matter? Diversification. When passenger demand dips (as it inevitably will), cargo can carry the load.

Balance Sheet: Stronger Than Ever

IAG’s debt? Down €1.4 billion to €6.1 billion, slashing its net-debt-to-EBITDA ratio to 0.9—a warrior’s balance sheet. The company is also buying back shares (€530 million so far toward a €1 billion plan) and keeping dividends alive. This isn’t a company clinging to survival; it’s positioning for dominance.

Analysts Are Bullish—But the Market Lags

Analysts love what they see. RBC Capital reaffirmed an “Outperform” rating with a 440p price target, while Hargreaves Lansdown praised IAG’s “market-leading networks” and operational focus. Yet shares are still down 2.7% year-to-date—a disconnect IAG’s results could fix.

The Bottom Line: A Stock Worth Taking Off With

Here’s why IAG is a buy now:
1. Profitability: A 191% jump in operating profit isn’t a fluke.
2. Demand Resilience: Premium cabins and transatlantic routes are bulletproof against economic headwinds.
3. Fleet Strategy: Modern, efficient planes mean lower costs and long-term growth.
4. Balance Sheet: Debt is down, cash flow is up, and share buybacks are firing on all cylinders.

The risks? Fuel prices could spike again, and a global recession might hit travel. But IAG’s diversified revenue streams and cost controls make it sturdier than most. With a forward P/E ratio of just 12 (vs. peers at 15-20) and RBC’s 440p target implying 15% upside, this stock is primed for takeoff.

Final Call: IAG isn’t just flying—it’s soaring. Load up now before the rest of the market catches on.