By Yadarisa Shabong and Joanna Plucinska

(Reuters) - British Airways owner IAG reported a 27% jump in annual operating profit on Friday, beating market expectations as it curbed costs and growth in its lucrative transatlantic routes took off.

Its shares jumped 5% to hover close to a five-year high of 368 pence it hit in early February, as IAG also said it plans a 1-billion-euro ($1 billion) share buyback.

European airlines overall have struggled in the past year with spiralling costs and delivery delays.

IAG, which also owns Spanish airlines Iberia and Vueling, said however it was confident about delivering margins and returns as demand for travel remained strong.

"The airline operator has been boosted by cheaper fuel prices and resilient demand for travel, as squeezed consumers prioritise travel," Julie Palmer, partner at business consultancy Begbies Traynor said in a note.

The group posted adjusted operating profit of 4.44 billion euros, above analysts' expectations from a company-compiled poll for 4.08 billion euros.

"These results highlight the... effectiveness of our strategy, underpinned by the successful execution of our transformation programme across the group," CEO Luis Gallego said in a statement.

In stark contrast to other European airline stocks, its shares have soared in the past year as the group benefited from limited delivery delays, strong demand and resilience on its core transatlantic routes.

Lufthansa is more exposed to the tougher Asian market than IAG, where Chinese carriers are able to fly in Russian airspace, making their flights shorter and cheaper.

At Air France, the Paris Olympics caused international tourists to avoid the city and residents in France to postpone their holidays.

Lufthansa and Air France-KLM report their full-year results on Thursday.

UNCERTAINTY ON DELIVERIES

IAG pointed to possible plane delivery delays this year from Airbus and Boeing ( BA ), adding that it was looking to put in an order for another round of widebody planes in the future.

"We need to adjust our capacity because of the situation," Gallego said on a media call, adding that the group expected 26 aircraft deliveries in 2025.

But supply constraints ultimately could benefit airline results, analysts have said, and could help IAG further bolster its exceptionally strong position compared to its competitors.

"While airlines individually wish they had new, modern aircraft with more capacity and higher fuel efficiency, collectively this should keep the industry supply-constrained, yields supported and earnings high," Bernstein analyst Alex Irving said in a note.

($1 = 0.9628 euros)

(Reporting by Yadarisa Shabong in Bengaluru; Editing by Janane Venkatraman, Jan Harvey and Emelia Sithole-Matarise)