**IAG's Q2 2026 results: a stark reminder of fuel price volatility** International Airlines Group (IAG), the parent company of British Airways, Iberia, Vueling, Level, and Aer Lingus, reported a net profit of €732 million for the second quarter of 2026, a 35% decline compared to €1.13 billion in the same period last year. Operating profit before exceptional items fell 16.3% to €1.4 billion, primarily due to higher fuel costs. Revenue edged up 0.2% to €8.9 billion, indicating resilient travel demand despite geopolitical tensions. The Middle East conflict has driven kerosene prices sharply higher, squeezing margins across the European airline industry. **Fuel hedging and cost management: key levers for airline profitability** IAG attributes the margin deterioration directly to the surge in kerosene prices, exacerbated by the war in the Middle East and oil supply disruptions. The group estimates it can offset about 60% of the fuel cost increase through revenue growth and cost-cutting initiatives. Notably, IAG has hedged approximately 70% of its fuel needs for the year, a strategy that limits exposure to sudden price spikes. CEO Luis Gallego emphasized the group's strong fundamentals, stating, "We are well placed to face these short-term headwinds." This highlights the critical role of fuel hedging and cost discipline in airline financial management—a lesson that ATPL and ATC students should grasp as they prepare for careers in an industry where fuel is often the largest single expense. **First-half performance and capacity strategy** For the first half of 2026, IAG's net profit stood at €1.033 billion, down about 20% year-on-year. Operating profit before exceptional items was €1.757 billion, a 6% decline, with an operating margin of 10.9%. Revenue grew about 1%, driven by passenger revenue, while cargo revenue suffered from route suspensions linked to the Middle East crisis. Despite these pressures, IAG plans to keep total capacity at 2025 levels, abandoning the previously planned increase. This cautious approach reflects the need to balance demand optimism with cost realities—a decision-making process that future aviation professionals will encounter in their own operational planning. **Industry-wide impact and resilience** IAG is not alone in facing these challenges. European low-cost carriers Ryanair and easyJet have also reported declines in quarterly profits due to similar fuel cost and consumer caution issues. The entire European aviation sector is grappling with higher energy bills and increased geopolitical volatility. Yet IAG's ability to maintain a double-digit operating margin and generate nearly €2.9 billion in free cash flow in the first half demonstrates resilience, according to analysts. For students, this underscores the importance of understanding macroeconomic factors, fuel markets, and strategic hedging in aviation management—skills that are essential for navigating the industry's cyclical nature.