10 C-Suite Insights from IAG’s Earnings Call

IAG continues to assert its earnings power. The group – which operates big-name airlines including British Airways, Iberia, and Aer Lingus – posted the best full-year results in its history on Friday.

Operating profit grew 27%, with an overall operating margin of 13.8%. Building on what CEO Luis Gallego describes as a “highly attractive” customer base, the company now boasts industry leading profitability. British Airways led the way, underpinned by robust performance on key North American routes.

Looking beyond the headline numbers, here are 10 key takeaways and C-Suite comments from an earnings call that was one of the most upbeat in recent memory. 

1. IAG Loyalty is Booming

The notion of loyalty being an important part of the modern airline mix is nothing new. However, Friday’s IAG earnings call offered valuable new insights into how critical it is to group profitability. 

IAG Loyalty (IAGL) is now its third-largest operating company by profit, behind only British Airways and Iberia. In 2024, the subsidiary delivered double-digit profit growth and £420 million ($530m) in profit. Gallego highlighted the loyalty division’s asset-light, cash-generative model, noting that IAGL is now the biggest driver of capital-light earnings growth in the group. 

The IAG CEO said loyalty performance is going from strength-to-strength, and set out an ambition to continue growing the business at more than 10% a year.

IAGL has almost doubled its profit since 2019 and grew by over 14% last year. New Avios currency partnerships with Finnair and Loganair in the previous 12 months have further boosted its consumer appeal, building on its more established agreement with Qatar Airways.

2. No Immediate BA Backlash

More than 20 million Avios were collected every hour last year, up 24% versus 2023. However, it hasn’t been entirely smooth flying. The new year started with a controversial shift to a spend-based model at British Airways’ loyalty program. This sparked a public backlash and resulted in modest concessions being announced several weeks later. 

Reflecting the depth of feeling surrounding the BA loyalty changes, the very first question from investors on Friday to IAG bosses was about the impact of the move. In response, Sean Doyle, British Airways CEO, said no changes in travel patterns were reported since the overhaul was announced.

“I think we’ve been communicating exactly how the program works, and I think the more people are learning about the spend-based earn program and the additional ways they can earn tier [points], I think more positive news is being received,” said Doyle.

British Airways’ rivals have seized the opportunity to attract frequent flyers to their own programs. Earlier this week, easyJet reported a 51% increase in new members of its loyal scheme in the month following BA’s announcement. Virgin Atlantic, Lufthansa, and Air France-KLM have also been promoting special opportunities to switch. 

3. BA Holidays Prove Popular

One of the key drivers of increasing revenue at IAGL is British Airways’ holiday division. Last year, it moved from being part of the airline to being an IAG Loyalty business. In 2024, it had 1.3 million customers, up 13% year-on-year – but there’s more to come. On Friday, Nicholas Cadbury, IAG's Chief Financial Officer said BA Holidays has “tremendous growth potential.”

The CFO was joined on the call by Adam Daniels, who heads IAG Loyalty. As the former chairman of BA Holidays, Daniels knows the business better than most, and delivered one of the call’s most interesting commercial insights.

“Currently, only 5% of BA [Executive] Club members book a BA holiday, but these customers represent nearly 80% of BA Holidays bookings, and only around 20% of those bookings use any Avios. We forecast that a 10% increase in BA Club members booking a BA holiday will double revenues. This is a huge opportunity for us,” he revealed.

4. North America is King

North America is IAG’s largest and most profitable market, accounting for almost a third of its capacity. The most recent fourth quarter – traditionally a quieter period – was “incredibly strong,” with revenue increasing 14.1%. 

As Cadbury put it: “Strong performance was widespread, however, you measure it,” with all of IAG’s main transatlantic airlines seeing unit revenue increase by double-digit percentages across the year.

Along with its joint business partners – most notably American Airlines – IAG now operates around 150 flights every day across the North Atlantic.

While Madrid and Dublin are important transatlantic hubs for the group, the greatest focus is on London. IAG claims to have 58% of capacity share between the UK capital and the United States, with the U.S. comprising 37% of the city’s overall long-haul capacity.

5. The Continued Rise of Latin America

Often overshadowed in the Anglo-speaking press by British Airways, Iberia is performing strongly. The Spanish flag carrier built on 2023’s strong margins, delivering a 9% increase in profit. For context, this is the first time in Iberia's history that it has generated more than €1 billion ($1.04bn) in operating profit. 

The factors driving Iberia’s growth are numerous, but one of the most important is the continued rise of Latin America and the Caribbean. The region is IAG’s third biggest market, second only to North America and Europe, with around 20% of total capacity. 

In the words of Gallego, “Madrid is the new Miami.” The IAG CEO said the Spanish capital is enjoying increased investment from wealthy Latin Americans, while Spain more broadly is one of the best-performing economies in Europe. 

A sharp rise in the number of Latin Americans visiting and living in Spain is fuelling demand for air travel between the regions. Anchored by Iberia, IAG is well-placed to capitalize on this trend. It reports a 21% capacity share compared to 18% for Air France-KLM and 10% for the Lufthansa Group, with plans to boost capacity by a further 4.5% this year. Overall, IAG’s Latin American revenue from Spain is up 60% versus 2019. 

6. Business Travel is Coming Back

IAG describes London as the number one market in the world for premium air travel, with business traffic accounting for a good proportion of that. Asked about the latest business travel trends, Gallego said there was a “mixed picture across the various [IAG] airlines.” 

The IAG CEO called out finance, including banking, accountancy, and consultancy as sectors that are “coming back to fly earlier,” with IT and technology firms also flying more. Gallego said corporate travel reached 74% of 2019 levels in 2024 and 86% of revenues. This was an increase in volume of three percentage points, and six points in revenue compared to 2023.

Offering a little more detail during the Q&A session, the IAG team revealed the following breakdown across its three business-heavy airlines, comparing pre-pandemic business travel trends:

Airline	Business Travel Volume (2024)	Business Travel Revenue (2024)
British Airways	66%	82%
Iberia	84%	108%
Aer Lingus	105%	100%
Source: IAG

Quelling speculation that demand for economy class travel might be softening, IAG bosses confirmed that load factors (a key indicator of aircraft occupancy) improved across all cabins.

7. Geopolitical Opportunities

With Ukrainian President Volodymyr Zelensky visiting the White House on Friday, there has been hope for progress on a deal between Moscow and Kyiv, even as negotiations are still tense. A knock-on impact of any agreement is the reopening of airspace above Ukraine and Russia to commercial airlines. 

Asked about IAG’s position on the issue, Gallego was pragmatic: “As soon as the airspace is open, we will reconsider flying again. However, we need to do our analysis of safety, because it is not only about overflying Russia, but is it in case you have a problem over Russia and you need to land there.”

While not mentioning specific cities, Gallego appeared openminded to returning to destinations that previously relied on Russian airspace. These are places that he acknowledged could currently be reached two or three hours faster by other airlines that continue to operate over Russia. 

“We will try to resume operations, but take into consideration the lack of aircraft that we have now in the market. We will give priority to the markets where we want to expand,” said the IAG chief.

Notably, Asia-Pacific is the only IAG region that has yet to return to pre-pandemic levels. That said, capacity in 2024 was up 27.5% versus 2023, boosted by the launch of Madrid to Tokyo, and BA’s return to Bangkok. Despite the capacity surge in 2024, Asia-Pacific still accounts for just 4.1% of IAG capacity as measured by available seat kilometers.

8. More New Planes

Along with financial insights, the IAG team also updated investors on upcoming aircraft deliveries. A total of 26 new planes are due in 2024. Just two of these are widebody aircraft, with the remainder all single-aisle jets. Of these, 14 are for short-haul routes, and 10 are deliveries this year - 14 short-haul planes, 2 long-haul widebody aircraft, and 10 Airbus A321XLRs.

IAG was the global launch customer for the XLR, or ‘Xtra Long Range’ aircraft. Skift was onboard the jet’s first transatlantic passenger flight from Madrid to Boston, with a recap available here. We now know that Iberia will receive a second XLR in the second quarter, with other deliveries also due at Irish flag carrier Aer Lingus. 

One new plane that definitely won’t be arriving this year is the Boeing 777X. The new twin-aisle jet is years behind schedule due to certification and manufacturing delays. Although IAG has ordered the aircraft, it is not one of the formal launch customers. Gallego confirmed on Friday that he is expecting the first 777X to arrive at IAG in 2027, but warned that “Boeing is still adjusting the program.”

The IAG team said they would consolidate their position in key markets further, but it is “constrained by aircraft availability and delivery schedules.” 

9. Consolidation Considerations 

The sale – or partial sale – of Portugal’s national airline is expected to gather pace in 2025. Given TAP Air Portugal’s robust network in South America and Africa, all of Europe’s big three airline groups have expressed interest.

Gallego provided investors with valuable color on IAG’s current thinking: “We are following the process by the Portuguese Government, and it looks like in March we are going to have the conditions of privatization. When we have that, we will make a decision,” said the IAG CEO. “We’ve always said that this is an interesting airline for the group, and we think we can improve the performance of the airline, and the airline can help the group have more presence in markets like Brazil, where we don’t have a lot of capacity.” 

Gallego did conclude with a potentially critical caveat: “We need to see the conditions and the freedom we would have to manage the company. To have the margins we have in [IAG] – between 12 and 16% – it’s because we do the right things. In maybe six weeks, we will have a clearer idea.” 

10. More Growth in 2025

Rather than a positive outlier in performance, IAG management suggests 2024 could be something closer to a new normal for the company. As Gallego put it: “This is not the peak, but the start of a more sustained level of profit.” 

All core markets performed well in 2024, and just as importantly, they also ended the year strongly. Q4 delivered the highest quarterly increase of any period in the year, with a 6% rise in profitability. 

Gallego said British Airways is making good progress towards a 15% operating margin in 2027. For context, its average between 2017 and 2019 was 13%. In the post-pandemic era, it was just 10% in 2023 and 14% last year. Group-wide targets are for a 12-15% operating margin and a return on invested capital of between 13 and 16%.

Despite being early in the year, Nicholas Cadbury, the IAG CFO, said 2024’s strong demand has continued into 2025. Capacity growth for 2025 will be 2.5% at British Airways, 4% at Iberia, 7% at Aer Lingus, and 14% at low-cost long-haul operator LEVEL – albeit from a much lower base.

Lufthansa Group and Air France-KLM, IAG's two biggest legacy airline rivals, will report their earnings on March 6.