2025 was a brilliant year for the International Consolidated Airlines (LSE: IAG) share price. Over the course of the year, it rose more than 35%. Can it continue to soar in 2026? Let’s take a look at where analysts see it going this year.
Why the price surged in 2025
IAG’s rally in 2025 was driven by several factors including strong profits, aggressive shareholder returns (dividends and share buybacks), a significantly strengthened balance sheet, and a shift into value stocks.
Throughout 2025, the airline operator consistently delivered good results as consumers continued to spend money on travel. For the first nine months of the year, the group reported an operating profit of €3.9bn, an 18% year-on-year increase.
Zooming in on shareholder returns, the company announced a massive €1bn share buyback in February, reducing the number of outstanding shares and boosting earnings for shareholders. It also paid its first final dividend since Covid during the year and increased its interim payout.
As for net debt, at the end of Q3 this stood at 0.8 times EBITDA, down from 1.1 times a year earlier. Debt had been a major drag on the IAG share price so investors cheered the company’s aggressive focus on cleaning up its balance sheet.
One other factor that helped the stock was the shift into value stocks. IAG was trading cheaply at the start of the year and benefitted from this shift in capital.
The outlook for 2026
As for the outlook for 2026, analysts expect the company to continue performing. Currently, they see revenue rising about 4% and earnings per share climbing about 7%.
In terms of the share price target, my data provider’s telling me the average price target’s 487p. That’s about 18% higher than the current share price.
Add in the dividend yield of 2%-3%, and investors could be looking at returns of around 20% this year. That’s most likely higher than the return the market as a whole will generate.
Note that the price-to-earnings (P/E) ratio as we start 2026 is only about 6.5 on a forward-looking basis. So the shares still look pretty cheap.
What are the risks?
I’ll point out however, that while airline stocks can be lucrative investments at times, they do tend to be poor long-term investments. In this industry, there’s always something going wrong eventually whether it’s a slowdown in travel spending, a spike in oil prices, geopolitical conflict that spooks travellers, or a sudden increase in capital expenditures.
Ultimately, airlines tend to be highly cyclical (boom and bust) investments. When things are good, investors can make money but when risks emerge, they can also lose a lot of money.
So while the shares could be worth considering as a short-term ‘value’ trade today, I won’t be buying them for my own portfolio. For me, there’s too much turbulence in this area of the market.
