IAG operating losses halve, but shares dive

A share price down 60% over three years but up 80% since October. We look at these latest results. 

First-half results to 30 June

• Operating loss of €2 billion (£1.7 billion), down from €4 billion (£3.4 billion) last year
• Liquidity of €10.2 billion (£8.7 billion)
• Net debt up 24% to €12.1 billion (£10.29 billion)

A slow opening up of global travel is fuelling a tentative recovery at International Consolidated Airlines (LSE:IAG).

First-half operating losses have halved, and hoped-for passenger capacity of 45% of the 2019 level in the current third quarter, is significantly up from the 21.9% in Q2. Cargo-only flight numbers are up by 5% between the first and second quarters, and demand for the airline’s financing instruments or bonds remains strong. Overall, the numbers look to be broadly in line with analyst forecasts. Liquidity remains strong and management actions to reduce cash burn ongoing. 

On the downside, management’s omission of any 2021 profit guidance continues to sum up the degree of uncertainty still being faced by the airline industry. Net debt is up and marginally ahead of forecasts, while the group’s capacity outlook is not as positive as rival Air France-KLM (EURONEXT:AF). Prospects for business travel, a key arena for British Airways, also remains clouded, with virtual meetings during the pandemic potentially making the costs and time of physical travel harder to justify in the future.

More favourably, IAG has taken considerable action since the start of the pandemic to conserve cash, bolster its finances and wait out the worst crisis in the industry’s history. Vaccination rates across much of the world continue to rise and governments such as those in the UK and US remain eager to ease restrictions. 

In all, and despite an 80%-plus gain in the share price since late October 2020, the consensus analyst fair price estimate is 237p per share and the overall market opinion points towards a ‘buy’.