IAG – about to take off?

Travel company TUI recently announced bumper bookings for its summer holidays. International Consolidated Airlines (IAG), which owns carriers Iberia, British Airways and Aer Lingus, looks likely to benefit from the same positive trends.

The company returned to profit in February, thanks to the lifting of Covid-related travel restrictions in 2022. IAG made a full-year pre-tax profit of €415 million compared to a €3.5 billion loss in the same period in 2021.

IAG says it expects profits to bounce back further in 2023, with full year operating profit before exceptional items forecast to be in the range of €1.8 to €2.3 billion, based on current foreign exchange rates and jet fuel forward prices.

IAG recently bought Air Europa, which it plans to use to make Madrid a hub, providing access to Latin America. Meanwhile, in February chief executive officer Luis Gallego said the company continued to see “robust forward-bookings”. The continued war in the Ukraine and cost price inflation remain concerns, however.

The shares have had a reasonable run in the past 12 months, up 10% to 149.15p. However, analysts at broker Deutsche Bank, who recently upgraded their rating on the shares from hold to buy, think they could reach 200p. Analysts there believe airline profits will recover more quickly than expected this year and that jet fuel prices will fall.

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