IAG, which also owns the Iberia, Aer Lingus and Vueling airlines, confirmed forecasts for average annual earnings per share growth of at least 12 percent and an operating profit margin of 12 to 15 percent for the 2016-2020 period. Those are targets it first set out this time last year.

The group did, however, trim its forecast for core earnings, saying it expected this to average 5.3 billion euros (£4.72 billion) per year, down from the 5.6 billion euros it had previously said.

IAG has already cautioned that currency effects would drag on its earnings this year after the pound weakened 14 percent against the euro and 16 percent since the dollar since Britain voted to leave the EU in June.

The outlook for most European airlines has darkened this year. They face falling fares after carriers, particularly low cost ones, put more seats on to the market to try to take advantage of low fuel prices and gain market share.

Britain's Brexit vote and the resulting uncertainty and currency moves, a series of attacks in Europe, plus depressed appetite for corporate travel, have all put the brakes on demand this year, prompting IAG to trim capacity and twice downgrade its 2016 profit forecast.

SLOWING EXPANSION

IAG lowered its 2016-2020 capacity growth plans, measured in available seat kilometres, to around 3 percent a year, compared to the 3-4 percent previously targeted, and said it would invest less on capital expenditure each year.

The airline group also said it was focused on shareholder cash returns, highlighting its strong outlook for equity free cash flow targets and its strong balance sheet.

Shares in IAG traded down 3.1 percent at 435.3 pence by 0950 GMT. They had risen 8 percent since it announced third quarter results a week ago outperforming Britain's bluechip index <.FTSE> which lost 2 percent of its value in that period.

Cantor analyst Robin Byde said: "The key messages on long term operating profit margins and free cash generation are unchanged but IAG has softened its capacity growth and capex forecasts; perhaps indicating that the cycle has turned."

Liberum analyst Gerald Khoo called the downgrades "minor" and said the lower core earnings figure probably reflected the currency impact.

IAG is also suffering due to its exposure to Britain. It reports in euros but gets a third of its revenues from the UK and pays for fuel in dollars.

(Reporting by Sarah Young, reporting by James Davey)

By Sarah Young