International Airlines Group (IAG) has seen its capacity drop lower than expectations in the first half of the year, following the impact of the Middle East conflict and the timing of Easter.

The group, which owns airlines including British Airways and Aer Lingus, said it had recorded a "strong first quarter and resilient second quarter", with revenue increasing by 1% year-on-year in H1 to €16bn, driven by strong demand.

However, in Q2, its revenue dropped by 0.2% to €8.88bn, while its operating profit also decreased by 16.3% to €1.4bn, as a result of higher fuel costs.

In H1, its profit after tax fell by 20.6% to just over €1bn.

In its outlook, IAG said it expects demand for travel across its network to remain strong, and anticipates recovering around 60% of the higher fuel cost, through both revenue and cost initiatives.

Despite this optimism, the group expects its full-year capacity to be flat year-on-year.

Following the update, shares in IAG dropped by over 4% in early trading, but this has recovered to a drop of just 0.7%.

CEO at IAG, Luis Gallego, said it has "again demonstrated that its excellent fundamentals are supporting continued value creation" for its shareholders, despite geopolitical impacts.

He concluded: "We are well-positioned to deal with these near-term headwinds with a diverse portfolio of world-class brands in large and attractive markets; industry-leading margins; significant free cash flow and a strong balance sheet; and attractive shareholder returns.

"Our long-term transformation programme has created the resilience that we are now benefitting from - products and services that our customers value, efficient and punctual operations and a low-cost base. Each of our businesses is very focused on continuing to execute their transformation plans to deliver further long-term benefits.

"We remain confident in our business model and strategy that has made us one of the best-performing airline groups in the world."

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