Home » Business

IAG – Recovery Ready To Take Off

Published on

Easing coronavirus restrictions helped passenger capacity at International Consolidated Airlns Grp SA (LON:IAG) rise to 58% of 2019 levels in the fourth quarter, pushing underlying cash profits (EBITDA) positive. The group’s full year capacity was 36.1% of 2019 levels, reflecting the impact of travel restrictions. This was an improvement over 2020 levels, and together with strong growth in cargo, fed into an 8.3% increase in revenue to €8.5bn.

Get The Full Henry Singleton Series in PDF

Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q4 2021 hedge fund letters, conferences and more

The profit increase together with a 26.5% decline in expenses like staff costs and fuel meant operating losses narrowed from €7.5bn to €2.8bn.

The impact of Omicron and seasonal trends are expected to drive a “significant” operating loss in the current period. This is expected to swing to a profit in the second quarter, with positive profits and cashflow expected for the full year.

The shares were rose 1.3% following the announcement.

IAG Is Finally Turning A Corner

Laura Hoy, Equity Analyst at Hargreaves Lansdown:

“IAG’s results suggest the airline is finally turning a corner after a hard few years. Passenger revenue was almost completely weighted toward the end of the year as easing restrictions allowed more planes into the sky.

Cost saving measures to get through the pandemic appear to be somewhat sticky as well. Despite an uptick in capacity, underlying operating expenses were lower suggesting IAG will be able to maintain at least some of its new lower cost base as passengers return. This is a positive sign for the future as it means the group will be able to squeeze more out of this blossoming recovery.

However the group’s not out of the woods just yet. The first quarter is expected to produce more losses as Omicron and seasonal trends weigh. Cashflow was negative, driving debt further skyward. While we don’t have any immediate liquidity concerns, it’s worth noting that it’s going to take a long time to get debt back down to manageable levels—it’s likely to remain a priority over shareholder returns for some time to come, particularly if interest rates continue to rise.

The Ukraine crisis, rising inflation and ongoing geopolitical tension is likely to weigh on passenger numbers moving forward.”

About Hargreaves Lansdown

Over 1.7 million clients trust us with £141.2 billion (as at 31 December 2021), making us the UK’s number one platform for private investors. More than 98% of client activity is done through our digital channels and over 600,000 access our mobile app each month.