British Airways fares to rise as IAG absorbs £1.7bn fuel cost hit

British Airways fares will rise this year as parent group International Airlines Group (IAG) works to recover the bulk of a €2bn increase in fuel costs driven by the Iran war. The group confirmed the fare increases after revealing its annual fuel bill had jumped from an expected €7.1bn to approximately €9bn, with 70% of supply hedged against the full impact of rising jet fuel prices.

IAG chief executive Luis Gallego said the group would recover around 60% of the additional fuel costs through a combination of fare rises and cost management, with British Airways bearing a disproportionate share. "Unfortunately, for example, BA that is a more premium brand, they are going to have a higher pass-through compared, for example, with Vueling," Gallego said.

Recovering €1.2bn of the additional €2bn costs is estimated to add around 8% to BA's fares, based on its 2025 revenues. The remaining €800m will weigh on group profitability, with Gallego warning that "the impact of the higher fuel price will inevitably lead to lower profit this year than we originally anticipated."

For more on the fuel supply pressures affecting UK aviation, see our coverage of UK airlines being cleared to cancel or consolidate flights over jet fuel shortages, and the broader picture of 13,000 flight cancellations in May as the crisis escalated. The Business section carries the latest on corporate earnings across aviation and energy.

How much will British Airways fares rise?

Based on BA's 2025 revenues, recovering €1.2bn of additional fuel costs translates to an estimated 8% increase in average fares. IAG said the pass-through would be weighted towards BA given its positioning as a premium carrier, while sister airlines Vueling, Iberia, Aer Lingus, and Level would see smaller adjustments.

Gallego said the group was "actively managing the uncertainty created by the fuel price increase and its impact, taking the necessary action on yields, costs and capacity". IAG also confirmed it was not experiencing fuel scarcity in its main markets and expressed confidence in supply availability through the peak summer period.

IAG's fuel hedging position and supply outlook

The group's 70% hedging position shielded it from the full force of jet fuel price increases since the start of the Iran conflict, but left it exposed to a significant share of the market movement. Global oil prices reached peaks of $126 a barrel during the conflict, compared to $72 a barrel just before hostilities began. At the time of reporting, Brent crude was trading at just above $100 a barrel.

Gallego said Asia had initially been a concern for fuel availability but was now building reserves, adding: "We expect to fly everything we have in the schedule for the summer." BA chief executive Sean Doyle said his airline had an "advantageous resilience" given its investments in UK fuel depots and direct supply arrangements from ports and refineries. IAG's chief financial officer Nicholas Cadbury described BA as being in a stronger position than the broader market due to those "significant investments in the UK and BA in depots and fleet".

Flight cancellations and industry-wide pressure

Across the aviation industry, approximately 2 million airline seats were cut from schedules in May, according to data from Cirium. At London Heathrow, BA's main base, a net 111 flights disappeared from schedules. UK airlines have been granted greater flexibility to cancel or consolidate flights ahead of time to manage fuel constraints without losing valuable airport slots.

International agencies have warned that Europe faces jet fuel shortages if the Middle East conflict continues to disrupt supply. Analysts at Goldman Sachs identified the UK as the most exposed country in Europe given its status as the continent's largest net importer of jet fuel. IAG acknowledged in its results statement that continued Middle East disruption has the potential for supplies of jet fuel to be restricted on a global basis.

IAG's first-quarter results and profit outlook

Despite the fuel cost headwinds, IAG reported a pre-tax profit of €422m for the three months to the end of March, up 77% on the same period a year earlier. Revenue rose 1.9% to €7.2bn. The group described demand as strong across most markets, with the exception of the eastern Mediterranean where it recorded softer performance.

Before Friday's announcement, analyst consensus had forecast IAG operating profits of approximately €5.2bn for the full year, above last year's record €5bn operating profit. The revised fuel outlook makes that target difficult to achieve, though the group declined to provide updated full-year guidance figures.

Capacity management and route redeployment

Doyle said BA's strategy was to "fully, effectively redeploy capacity from markets where people aren't travelling to, such as the Middle East, into markets where people want to travel to". The airline's focus on redeployment rather than outright cancellation reflects both its commercial priorities and its relatively strong fuel supply position compared to smaller carriers.

What this means for British Airways passengers and UK aviation

An 8% average fare increase at BA represents a meaningful additional cost for travellers already navigating higher fuel surcharges and reduced route choice on Middle East services. Premium and long-haul routes, which account for a larger share of BA's revenue base, are likely to absorb a greater portion of the pass-through given Gallego's comments about BA's premium positioning. The structural gap between well-hedged, well-capitalised carriers and smaller operators is widening as the fuel shock continues, which may accelerate further consolidation in European aviation beyond the immediate crisis period.