Tentative recovery at IAG

A slow opening up of global travel is fueling a tentative recovery

Article updated: 30 July 2021 8:30am Author: Keith Bowman

First-half operating losses have halved and hoped for passenger capacity of 45% of the 2019 level in the current third quarter is significantly up from the 21.9% in Q2. Cargo-only flight numbers are up by 5% between the first and second quarters, and demand for the airline’s financing instruments or bonds remains strong. Overall, the numbers look to be broadly in line with analyst forecasts. Liquidity remains strong and management actions to reduce cash burn ongoing.

On the downside, management’s omission of any 2021 profit guidance continues to sum up the degree of uncertainty still being faced by the airline industry. Net debt is up and marginally ahead of forecasts, while the group’s capacity outlook is not as positive as rival Air France-KLM. Prospects for business travel, a key arena for British Airways, also remains clouded, with virtual meetings during the pandemic potentially making the costs and time of physical travel harder to justify in the future.

More favourably, IAG has taken considerable action since the start of the pandemic to conserve cash, bolster its finances and wait out the worst crisis in the industry’s history. Vaccination rates across much of the world continue to rise and governments such as those in the UK and US remain eager to ease restrictions.

In all, and while an 80%-plus gain in the share price since late October 2020, and just prior to vaccination development success, should not be forgotten, a consensus analyst fair price estimate of 237p per share has to date left overall market opinion pointing towards a ‘buy’.

More from Keith Bowman: read more articles directly on the interactive investor website.

These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees.

Keith Bowman

Investment Writer/Analyst

Keith began his career in the City in 1986 with Kleinwort Grieveson Securities. He then worked for Barclays and NatWest Stockbrokers before joining Hargreaves Lansdown as an Equity Analyst in 2005. A member of the Chartered Institute for Securities & Investment (MCSI), he joined interactive investor in 2019, where he now works as a companies analyst within the equities team. You will often see Keith quoted in the financial press.

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