One of our analysts discusses IAG's recent update to the market.
IAG shares gain altitude, rising 4%
- Improving non-fuel costs and full-year profit guidance remaining the same offer investors some reassurance in light of recent performance
- The 60% drop in operating profits caused by a range of headwinds including rising fuel costs
- Despite concerns over post-Brexit ownership, we continue to recommend the shares as a ‘Buy’
British Airways owner, IAG, reassured the market with their first quarter results, despite the fact the company reported a 60% drop in operating profit at €135m. That was partly due an 11% rise in fuel costs on a constant currency basis. The company highlighted foreign exchange headwinds, market capacity and the timing of Easter as other factors affecting its performance. Passenger unit revenue declined by 1.4%; however the company expects an improvement over the course of 2019 and full-year operating profit is still expected to be the same as last year.
The shares gained some altitude in early trading with a 4% rise, which will be welcomed by investors given that they’ve been in a nosedive over the last three months. The fact that full-year profit guidance remains the same and non-fuel costs are expected to improve, are certainly positives for investors. While some uncertainty remains around whether the company will conform to the EU's rules on ownership post-Brexit we continue to recommend the shares as a 'Buy' for investors seeking growth but willing to accept a higher level of risk.
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