IAG shares jump as tailwinds build for British Airways owner
IAG shares rose further on Tuesday as investors piled into the owner of British Airways amid growing tailwinds for the airline group.
The shares seemed to benefit after US President Donald Trump backtracked on plans to impose a 50 per cent tariff on the EU in early June.
Trump announced over the weekend he had extended the EU’s deadline to 9 July, as opposed to 1 June. This was coupled with news of a dip in crude oil prices ahead of an expected increase in OPEC+ members’ output.
IAG’s stock rose nearly four per cent in early deals, adding to its already stellar 90 per cent rise over the last 12 months.
Investors had shown some caution in April when Trump unveiled his ‘Liberation Day’ tariff war as the IAG is highly exposed to fluctuations in transatlantic travel.
The most recent data indicates that business travel to the US is on a general downward trajectory. The National Travel and Tourism Office released preliminary figures in May showing a nine per cent drop in UK-US trips in April.
British Airways benefits from premium cabin sales
There have been some signs of resilience, however. IAG said earlier this month that “softness” in US economy bookings had largely been offset by its premium cabins.
Heathrow Airport also recently reported a solid increase in year-to-date transatlantic passenger traffic, which rose 5.5 per cent to around 1.8m.
IAG, which also owns Aer Lingus and Vueling, will benefit from falling oil prices. On Tuesday morning, the price of a barrel of Brent crude oil was down to $64.2.
Fuel is typically one of the biggest expenses for airlines, meaning fluctuations in oil prices often have a direct impact on shares.
Goldman Sachs on Tuesday also doubled down on forecasts of weaker oil prices through 2025 amid reports that OPEC+ members are considering a significant production increase.
News of Trump’s rowback on EU tariffs boosted shares in a number of London-listed aerospace firms. GKN Aerospace owner Melrose rose 3.5 per cent, while Rolls-Royce was up 2.68 per cent.
Earlier this month, British Airways’ parent company bought 32 new Boeing (BA) planes from the US, following the country’s trade agreement with the UK.
IAG confirmed the order of the Boeing 787-10 aircraft for its BA fleet, alongside 21 Airbus planes for its other airlines.