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Highlights

  • IAG share price fell 7% in April and trades 35% below its peak amid global trade disruptions.

  • US tariffs on UK and EU goods dampen demand on IAG’s transatlantic routes, a key profit driver.

  • Heathrow shutdown, new UK regulations, and recession fears weigh on future earnings.

The International Consolidated Airlines Group (LSE:IAG), parent company of British Airways and Iberia, experienced a sharp 7% drop in its share price during April, wiping out a significant portion of its earlier gains. Once one of the FTSE 100’s top-performing stocks, IAG now trades roughly 35% below its previous highs, as investors digest a series of setbacks impacting the airline group.

Tariffs Spark Transatlantic Tensions

The steep decline was largely triggered by rising global trade tensions. On 2 April, the US government imposed a 10% tariff on UK goods and a 20% tariff on EU imports. Given the importance of the transatlantic market to IAG — particularly for its British Airways and Iberia operations — these tariffs have cast a shadow over future profitability.

The US is the UK’s largest export partner and a critical destination for IAG’s long-haul flights. The new tariffs threaten to curtail business activity between the regions, particularly on high-margin routes. Business travel, a key revenue stream, is expected to slow as companies tighten their belts in response to the uncertainty. The situation is further complicated by recession warnings from US carriers like Delta Airlines, which could further reduce both business and leisure demand.

Heathrow Fire Disrupts Operations

Adding to IAG’s woes, a fire at an electrical substation in March forced Heathrow Airport — the UK’s busiest hub — to shut down for an entire day. More than 1,300 flights were cancelled or delayed, with British Airways bearing the brunt of the disruption. Analysts estimate that compensation and operational costs from the incident could knock as much as 3% off IAG’s 2025 earnings.

Regulatory Headwinds and Market Shifts

Beyond trade and operational disruptions, regulatory changes are also posing challenges. In late March, the UK's Competition and Markets Authority (CMA) ruled that IAG and other leading airlines must relinquish some of their slots at London airports to rivals, especially on profitable transatlantic routes. 

Jet Fuel: A Mixed Blessing

On a more positive note, jet fuel prices have fallen from $2.31 per gallon in early April to around $1.95, offering a degree of cost relief. Since fuel makes up 25–30% of an airline’s operating expenses, this drop could help cushion the blow from other pressures. However, the decline in fuel prices is itself a byproduct of weakening global demand — an echo of the same trade slowdown affecting passenger numbers.