IAG Loyalty delivered strong FY2025 growth, with €2.65bn external revenue and €548m operating profit. Avios issuance rose 13% to 200bn, while holiday and partner revenues expanded. The segment remains a high-margin, asset-light priority for IAG. However, a UK VAT dispute with HMRC creates accounting uncertainty, including a €507m recognised asset.
IAG27 February 2026
IAG Loyalty FY2025 financial results (year ended 31 December 2025; released 27 February 2026)
IAG Loyalty (the Avios business, including British Airways Holidays) finished FY2025 as one of International Airlines Group’s (IAG’s) standout “asset-light” earnings engines. In the Group’s FY2025 results package, IAG reported double-digit profit growth at IAG Loyalty, expanding revenues, and continued momentum in Avios issuance/redemptions — while also detailing a major ongoing UK VAT dispute with HMRC that affects reported loyalty economics and balance-sheet treatment.
1) Headline performance: revenue up, profit up, margins very strong
Key FY2025 financials (IAG Loyalty segment)
From IAG’s segment reporting (euros):
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External revenue: €2,652m (FY2024: €2,512m)
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Segment revenue (incl. inter-segment): €3,041m (FY2024: €2,862m)
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Operating profit: €548m (FY2024: €495m)
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Operating margin (on external revenue, indicative): roughly ~21% (€548m / €2,652m)
These figures show IAG Loyalty growing both top line and profit year-on-year, with profitability that remains well above typical airline margins.
“Asset-light” strategic priority inside IAG
IAG explicitly frames IAG Loyalty as central to its strategy of growing earnings through asset-light businesses. In the FY2025 narrative, the Group notes that growth in IAG Loyalty supports both Passenger revenue and Other revenue (because Avios issuance/redemption mechanics flow through those lines).
2) What actually drove growth: Avios + partners + Holidays
Avios issuance and engagement
One of the most concrete operating KPIs IAG highlighted:
“IAG Loyalty issued 200 billion Avios, an increase of 13.1%…”
IAG also describes continued growth in the number of members collecting Avios, and calls out the long-term American Express partnership being extended during the year as part of that momentum.
British Airways Holidays and “holiday + hotel services”
Within IAG’s “Other revenue” breakdown, holiday and hotel services reached:
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€1,010m (FY2024: €990m)
And IAG states plainly that IAG Loyalty includes British Airways Holidays in its segment scope.
“Other revenue” growth explicitly tied to loyalty
IAG’s FY2025 “Other revenue” rose to €3,006m (up €414m / 16%), and within that it identifies:
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“Group holiday and hotel services revenue” up to €1,010m
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“other loyalty revenue (within brand and marketing services)” up to €451m
Those line items give a clean read-through: IAG Loyalty is being pushed beyond “airline points” into broader retail/partner and travel-packaging economics—exactly the kind of diversification loyalty businesses aim for.
3) The big complication: the HMRC VAT dispute and its accounting effects
A major portion of the FY2025 results narrative (and the notes) relates to UK VAT treatment for IAG Loyalty/Avios.
What HMRC asserted
IAG discloses that on 29 October 2024, HMRC issued a decision asserting that VAT should apply at the standard 20% rate on the issuance of Avios, rather than the historical method that depended on the nature of redemption products.
The €507m balance-sheet asset (and why it exists)
IAG reports that as at 31 December 2025 it recognised €507m as a non-current asset relating to VAT it expects to recover, and describes management judgement around whether these amounts are recoverable while the dispute proceeds.
Additional contingent asset disclosure
IAG also discloses €89m in payments (for periods after the 29 Oct 2024 decision) as a contingent asset at 31 December 2025.
Why investors should care
This matters because VAT accounting can change:
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the timing and classification of loyalty-related revenue recognition (deferred revenue vs revenue on redemption), and
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the near-term cash flow / working capital profile of the loyalty business, even if ultimate economics are unchanged.
IAG’s FY2025 materials also explicitly flag that some reported growth metrics are described “before the impact of adopting HMRC’s VAT approach” (which the Group disputes and is under litigation).
4) A simple scorecard: FY2025 vs FY2024 (IAG Loyalty segment)
| Metric | FY2025 | FY2024 | YoY |
|---|---|---|---|
| External revenue | €2,652m | €2,512m | +€140m |
| Segment operating profit | €548m | €495m | +€53m |
| Avios issued | 200bn | (not stated in the same FY25 headline line) | +13.1% (per IAG) |
Segment figures are from IAG’s official reporting.
Global Loyalty Organisaiton Take:
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IAG Loyalty is growing as a high-margin profit pool.
The segment’s €548m operating profit on €2,652m external revenue underlines why IAG keeps calling it a strategic priority. -
The “partner + travel retailing” model is doing real work.
The results commentary points to growth in non-airline partner revenue streams, while the “Other revenue” breakdown shows steady scaling of holiday/hotel and brand/marketing lines. -
Avios engagement expanded meaningfully.
A 13.1% increase to 200bn Avios issued is a strong indicator of increased earning activity—typically reflecting more card spend, partner transactions, and travel purchases attached to the scheme. -
HMRC VAT remains the big swing factor for reported loyalty numbers (and potentially cash timing).
The dispute is significant enough to drive a €507m non-current asset and additional contingent disclosures.
Source: IAG Loyalty
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