HomeAir LineIAG recovery not yet in action

IAG recovery not yet in action

The company is trading at 4.5 times its earnings per share, compared to 6 times pre-pandemic

British Airways plane landing at Heathrow, London.Toby Melville (REUTERS)

IAG’s post-pandemic recovery is being noticed everywhere but in its valuation. The parent company of British Airways and Iberia, valued at 7.4 billion pounds (8.7 billion euros), announced yesterday that its operating profit before exceptional items stood at 3.5 billion euros in 2023, around 8% more than in 2019 , the year before the outbreak of covid. Passenger levels are also roughly on par with pre-pandemic numbers.

However, the stock trades at around 4.5 times its 2024 earnings per share, using analyst forecasts compiled by LSEG, down 25% from an average of about 6 times over 2018 and 2019.

Debt is one of the reasons. Rising profits have helped IAG reduce net debt to €9 billion, or just 1.7 times its ebitda, by the end of 2023. That’s well below the 3.1 times level at the end of 2022. Air France-KLM had €5 billion of net debt at the end of 2023, around 1.2 times its ebitda, while Ryanair has €150 million of net liquidity.

Geopolitical uncertainty and fears of inflation impacting consumer demand are likely to make investors cautious. But at the moment these fears do not seem to be confirmed: echoing its rivals, IAG claims that bookings for the coming months have exceeded last year’s levels. Despite some turbulence, shares of the company led by Luis Gallego are likely to rise.

The authors are columnists for Reuters Breakingviews. The opinions are yours. The translation, of Carlos Gómez Belowit is the responsibility of Five days

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Source: Cincodias



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