International Consolidated Airlines – Gathering Speed As Runway To Profits Clears

International Consolidated Airlines – Gathering Speed As Runway To Profits Clears
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International Consolidated Airlines Group SA (LON:IAG) reported third quarter revenues of €2.7bn, a 118.6% increase year-on-year. That reflects an increase in passengers flying further on fuller planes, while cargo volumes also increased substantially.

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Fuller planes and longer flights meant average cost per kilometre fell substantially, and as a result, underlying operating losses improved from €1.3bn to €485m.

The group’s shares were unmoved in early trading.

International Consolidated Airlines' Planes Are Getting Back Into The Air

Nicholas Hyett, Equity Analyst at Hargreaves Lansdown:

“Airlines’ high fixed cost base means that now IAG’s planes are finally getting back into the air the effect on profits is dramatic.

IAG is operating a fraction of its 2019 flights, and these planes are far from bursting at the seams, but losses per seat kilometre flown have narrowed from €9.14 to €2.98. That’s because the group’s fixed costs, think plane leases, head office and staff costs, are spread over a far wider pool of flights. Meanwhile variable costs like fuel, aircraft handling and landing fees are increasing at a slower rate than revenue. If the group can maintain a similar dynamic in the fourth quarter, when it's set to increase the number of flights on offer once more, it might be within touching distance of breaking even – although management have budgeted for further losses.

Despite the progress there is a long way to go before IAG returns to where it was pre-pandemic. Until it gets back into cash flow positive territory it will continue to lump around a growing parcel of debt, which must ultimately be repaid from a business that may well end up being smaller than it was in 2019. The share's current price to book ratio is a perfect illustration of just how much damage has been done over the last 18 months, at over seven versus a long term average of less than two the pandemic has wiped out equity value and at one point left the group clinging on – it may be an accounting technicality, but it’s a telling one.”

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Jacob Wolinsky is the founder of, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at) - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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