International Consolidated Airlines Group‘s (LSE:IAG) enjoyed another year of blistering share price gains in 2025. Up 33%, IAG as it’s known has comfortably beaten the broader FTSE 100‘s 18% rise since 1 January.
Robust travel demand and falling fuel costs have delivered excellent profits growth this year. But can IAG and its shares continue their stunning ascent?
One bullish City analyst certainly believes so. They’re expecting the British Airways owner’s shares to jump another 69% over the next 12 months, to 679p.
Are forecasts like this mere pie in the sky? Or is IAG cleared for take-off?
Heading higher
The travel industry’s resilience in today’s challenging consumer landscape continues to surprise. With its leading brands and extensive networks, IAG has effectively capitalised on this sustained market growth.
For 2025, the business expects to deliver “good earnings growth [and] margin progression.” If industry commentators are correct, next year could be another great one for airline stocks like this.
International Air Transport Association (IATA) projections suggest industry profits of $41bn next year. That’s up from $39.5bn in 2025.
IAG’s strong balance sheet means it can add routes and grow its fleet to capitalise on this. But that’s not all. With a net-debt-to-EBITDA ratio of just 0.8, the business also has scope for further share buybacks and explosive dividend growth, giving the share price added fuel.
What could go wrong?
Yet it would be reckless not to mention the dangers facing IAG in the uncertain economic and geopolitical climate. Latest financials released in November underlined the potential challenges to come.
Revenues for Q3 were flat at €9.3bn year on year, roughly €200m short of forecast. This reflected weakening passenger revenues and declining cargo demand.
Worsening economic conditions are just one notable threat in the New Year, though. Tightening border controls in the US pose a significant problem given its reliance on strong transatlantic routes.
Under new rules, visitors may have to submit a raft of extra information including social media histories, personal details of family members, perhaps even DNA. The requirements would apply to travellers from 40+ countries, including the UK.
This could be a significant problem for British Airways, which accounts for 47% of IAG’s group profits. Iberia and Aer Lingus also operate regular flights to and from the States.
Is IAG a Buy?
Taking all these factors into account, are IAG shares worth a look?
The risks in the New Year are clear, while long-term dangers like rising fuel costs, intense competition and route disruptions are other potential obstacles investors must consider.
Yet some may argue these potential hurdles are baked into the company’s low valuation. At 6.3 times, its price-to-earnings (P/E) ratio for 2026 is roughly half the FTSE 100 average of 12.1 times.
I’m not convinced, though, and feel IAG’s share price could retrace sharply next year. But while I won’t buy the travel giant myself, it could be worth considering by more risk-tolerant investors.
