IAG’s CEO on the Value of Diversification When Fuel Spikes

The Decision Brief SKIFT AVIATION FORUM How Transformation Helps a Diversified Airline Group When Fuel Spikes Luis Gallego, CEO, International Airlines Group Moderated by Gordon Smith, Airlines Editor, Skift THE TAKEAWAY Airline groups facing volatile fuel costs and uneven demand need a disciplined approach to allocating capital across different markets and business models. Gallego argued that IAG’s resilience comes from combining diversified operations with centralized investment decisions, allowing individual airlines to pursue different strategies while competing for capital based on expected returns. PATHS FORWARD Allocate capital according to returns. Gallego said IAG reviews investment proposals from its airlines twice a year, selecting projects it believes will deliver the strongest shareholder returns while targeting group operating margins of 12% to 15%. Match commercial investment to market demand. Gallego described expanding premium seating at British Airways to serve strong London demand while acknowledging that the same configuration would be unsuitable for Iberia. Build flexibility into responses to cost volatility. Gallego described a three-year fuel hedging policy that balances protection against rising prices with the ability to benefit when prices fall. WHAT TO WATCH Whether investment discipline holds as costs rise. Gallego expects hedging to provide less relief in 2027 while IAG continues investing in aircraft and customer experience. Returns from those investments will test the group’s ability to sustain its margin targets. Whether diversification provides meaningful protection against fuel shocks. An audience member asked whether operating across different markets and business models improves resilience or simply distributes higher costs across a portfolio. The financial performance of diversified airline groups during future fuel spikes will help test that argument. Access all the Skift Takeaways from this event, as well as full session videos, presentation documents, and more editorial coverage at our Skift Aviation Forum attendees hub.