ii view: the outlook for IAG remains cloudy

Shares for this major airline are still volatile and vulnerable to fallout from geopolitical events. We assess prospects. 

Full-year results to 31 December 2021

• Total revenues up 8.3% to €8.45 billion
• Operating loss before exceptional items of €2.97 billion, down from €4.4 billion
• Liquidity up 50% year-over-year to €12 billion
• Net debt up 19.5% to €11.66 billion

Chief executive Luis Gallego said:

"We are confident that a strong recovery is underway. Our teams across the Group are taking every opportunity to develop our business while capitalising on the surge in bookings when travel restrictions are lifted. We are also monitoring recent geopolitical events closely to manage any potential impact.

"All our airlines continued to show improvements in the fourth quarter, optimising their performance and further improving their operating results. Our diversified business model enabled us to make the most of the recovery as individual markets were affected at different times and in different ways."

ii round-up:

International Consolidated Airlines Group SA (LSE:IAG) is one of the world's largest airline groups.

It operates over 500 aircraft and before the pandemic flew 118 million passengers annually to over 270 destinations. 

It is a Spanish registered company with shares traded on the London and Spanish stock exchanges.

Its brands include UK based British Airways, Spanish airlines Iberia and Vueling, and Irish based Aer Lingus. 

For a round-up of these latest results, please click here. 

ii view:

Investors in any airline company must be prepared for an often-turbulent ride. Volatile fuel costs, the weather, terrorism and even volcanic ash are some of the factors outside of management’s control that can impact performance. But a global pandemic has challenged the industry beyond anything seen in its history. 

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For investors, heightened geopolitical tensions, a war in Ukraine and an elevated oil price given the West's desire to wind down Russian supplies, now provide deep concern. Squeezed consumer finances given rising energy prices and elevated inflation may also reduce spending on travel, while the pandemic is far from over in parts of the world such as China and Hong Kong. IAG’s finances remain pressured, with net debt up over this latest financial year, while it is proving costly to bring back flight capacity. 

More favourably, travel demand and appetite prior to the conflict in Ukraine was clearly rising, with IAG's management hopeful of a significant return to travel over the course of 2022. Cash liquidity had increased from 2020 to 2021, while the group’s finances are expected to improve as some return to more normal levels of travel unfolds. For now, and while the highly uncertain outlook provides ongoing room for caution, a slow emergence from the pandemic looks to offer room for guarded long-term optimism. 

Positives: 

• Strong and diverse brands
• Significant fund raising previously undertaken

Negatives:

• Still highly uncertain outlook 
• Dividend payment remains suspended

The average rating of stock market analysts:

Buy