Stocks
by Zviad Maisuradze on May 18, 2020

INTL Consolidated Airlines (IAG) Shares are up 6% as Travel Restrictions Ease

The shares of International Consolidated Airlines Group (IAG) have risen by 6% on Monday, currently trading at 180.5p. This is a significant jump from Friday, during which the security closed at 169.45p. It goes without saying that travel restrictions imposed all around the globe due to the COVID-19 outbreak, had a very destructive effect on the airline sector. Quite recently Dave Calhoun, the CEO of Boeing mentioned that it might take 2 to 3 years for the industry to fully recover from this crisis.

As for the International Consolidated Airlines Group (IAG) itself, it is an Anglo-Spanish airline company. It has its headquarters in Madrid, Spain. The company was formed back in 2011 when British Airways merged with Iberia. As a result, both of the above-mentioned firms became fully owned subsidiaries of IAG. The newly formed company is a component of both FTSE 100 and IBEX 35.

In 2019, the company had annual revenue of €25.506 billion. This was 5.1% higher than a year ago. Despite this notable increase, the operating profit fell by €200 million to €3.285 billion, compared to 2018. The company has also stated it’s long term objective to reach net-zero carbon emissions by 2050.

The company did start making dividend payments back in 2015, paying 10 Eurocents per share. By 2019, the firm did manage to increase its total annual payments to shareholders to 31 Eurocents per share. In July of the same year, the management did reward its owners with a special dividend, amounting to 35 Eurocents per share. So we can conclude that at the time, the firm was quite generous to shareholders.

This all changed in 2020. As travel bans have taken effect, the company faced very difficult times. The firm published its first-quarter report at the beginning of May 2020. According to which it suffered €1.68 billion loss, with revenue falling by 13%.

How Far IAG Shares Have Fallen?

It goes without saying that after facing those devastating losses, dividend payments are out of the questions, at least for a couple of years. But what about the stock price performance?

                                                                                                                                                                                                source: cnbc.com

Well, as we can see from this chart, it had quite a good run from May 2019 until February 2020. During this period the shares have risen from 500p to 635p. March 2020 was a very difficult month for Equities. However, when it came to airline stocks, it was even worse, because of travel restrictions. As a result, IAG has lost 2/3 of its market capitalization just in a matter of 4-5 weeks, falling near 200p. The stock fell even lower as the first-quarter report revealed the scale of the losses suffered by the company.

However, as several countries announced the lifting of travel restrictions, the IAG bounced back and regained some of the lost ground. Although it might be helpful to keep in mind that at 180p the stock is still trading more than 70% lower than at the beginning of February.

This might seem quite a cheap price for IAG shares. However, the company does need to somehow restore its profitability, before we could talk about any buying opportunities. At the moment it seems like it will take a while before the industry can recover from recent shocks.

By Zviad Maisuradze

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