British Airways will increase ticket prices to offset most of a €2bn (£1.7bn) surge in fuel costs this year, its parent company has announced, warning that the Iran conflict will weigh on profits.

The International Airlines Group said its annual fuel expenses are now projected to reach about €9bn, up from an earlier estimate of €7.1bn. Around 70 per cent of its fuel supply has been hedged, limiting its exposure to the sharp rise in jet fuel prices since the conflict began.

IAG expects to recover roughly 60 per cent of the additional €2bn fuel burden through a combination of revenue and cost-management measures, with most of the fare increases expected to be applied by British Airways rather than its sister carriers.

The Chief Executive of IAG, Luis Gallego, said, “Unfortunately, for example, BA that is a more premium brand, they are going to have a higher pass-through compared, for example, with Vueling.”

Recouping €1.2bn would translate into an estimated 8 per cent increase in British Airways’ fares, based on its projected 2025 revenues.

Gallego said the group, which also owns Aer Lingus, Iberia, Vueling and Level, said the group was “actively managing the uncertainty created by the fuel price increase and its impact”, adding that it was taking necessary steps on yields, costs and capacity.

Concerns about potential fuel shortages have intensified after UK airlines successfully lobbied for permission to cancel more flights without jeopardising their valuable airport slots.

However, British Airways chief executive Sean Doyle said the airline’s priority was to “fully, effectively redeploy capacity from markets where people aren’t travelling to, such as the Middle East, into markets where people want to travel to”.

Doyle added that BA would have an “advantageous resilience” if fuel shortages were to hit the industry, citing the carrier’s own inventory and fuel supplies as a buffer.