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International Consolidated Airlines Group (LSE:IAG) has once more been one of the FTSE 100’s top-performing stocks of this year. But can it do it again in 2026?
I think it has a decent chance. But looking further ahead, what really catches my attention is the firm’s long-term ambition to make itself less exposed to cyclical forces.
More of the same in 2026?
Since the start of the Covid-19 pandemic, the IAG share price has bounced from £4.20 to 95p and back again. A lot of this, however, has been due to factors beyond the company’s control.
Despite signs of weakness in consumer spending, early indications are that travel demand is going to remain strong in 2026. And there are other positive signs as well.
Lower oil prices should help bring down fuel costs – one of the firm’s largest expenses. Falling interest rates should also give it a chance to bring down the amount it pays on its debts.
All of this means I think the outlook for the stock in 2026 is very positive. But from an investment perspective, I’m much more interested in the longer-term picture.
Building resilience
The big issue with IAG shares in recent years has been cyclicality. The firm has done very well in good times, but it’s regularly lost money during downturns that come without warning.
The company, however, is looking to make itself more resilient. In the first instance, this involves strengthening its balance sheet, but there’s a lot more to the plan than this.
IAG is investing in upgrading its fleet to more fuel-efficient aircraft. And it’s extending its delivery windows to avoid spending heavily when prices are high and demand is strong.
A focus on the premium end of the market – where demand is more resilient – is also part of the plan. But will it actually help IAG grow more steadily in the future?
Long-term outlook
It’s not realistic to think that IAG can eliminate cyclical ups and downs from its future earnings completely. But it will be interesting to see how far it can avoid the big losses.
In terms of its balance sheet, the company does have a lot of cash. A lot of this, though, is deferred revenue, which represents flights and holidays the company has to provide in future.
Spreading deliveries over a longer period is a move in the right direction. But the airlines I find the most impressive from an investment perspective are able to go further than this.
Ryanair, for example, managed to buy aircraft during the pandemic and got a big discount as a result. While IAG’s buying plan looks good, it’s some way from this level.
Wait and see
There are positive signs for 2026 and the idea that IAG might focus on its long-term resilience is encouraging to me. But I’m minded to wait and see how this develops.
For the time being, the business remains more cyclical than most. And the time to think about buying these stocks isn’t usually when things are looking good.
Given this, I’m focusing on other opportunities right now. When the next downturn shows up, I’ll take another look at how well-prepared the company is.
