IAG: British Airways owner set to report £1.3bn profit but Israel-Gaza conflict sparks concern
Shareholders in the International Airlines Group (IAG) will see a full picture of this summers’ record season of travel on Friday, as they look to determine whether the share price can fly over the quieter months of the year.
The bullish recovery from Covid-era lows was reflected across the sector, as holidaymakers worldwide nourished pent-up desire for travel built up during years of lockdown.
Analysts are forecasting operating profits in the region of €1.6bn (£1.3bn) for the third quarter of this year, which would match the equivalent period in 2019.
But investors are wary of the colder winter months, when leisure demand typically quietens and amid fears that corporate travel has yet to recover to pre-pandemic levels.
Whether the IAG share price, up over 25 per cent in the year to date, can continue to rise will be contingent on a number of pressing concerns.
Disruption as a result of airspace restrictions across Europe, epitomised by the system-wide collapse at the UK’s National Air Traffic Service (NATs) in August, continues to threaten carriers profits.
The resumption of conflict in the Middle East following Hamas’s attack on Israel has also bumped up global oil prices and by consequence, the cost of jet fuel.
Gerald Khoo, transport analyst at Liberum Capital, told Morning Wire the focus would be on “any evidence of a slowdown in bookings or deterioration in pricing trends,” – key to mitigating the impact of higher fuel prices – although he noted both had shown no sign of faltering yet.
The IAG is currently “well-hedged in the short term,” to rising jet fuel costs, Khoo added, but there is “still some residual exposure” which could affect the bottom line in the coming months.
The airline conglomerate, which owns BA, Iberia, Vueling and a host of other carriers, said it was “mindful” of uncertanty in the wider global economy in its record July results.
Similar warning shots on Friday would likely temper a further share price jump, despite what looks set to be a booming performance overall.