- First-quarter operating profit rises by €59mn to €69mn
- Net debt cut by €1.8bn to €7.4bn
International Consolidated Airlines (IAG) seemed to justify the 19 per cent year-to-date gain in its share price with a first-quarter set of numbers that were ahead of analysts’ expectations.
Revenue grew by 9 per cent to €6.4bn (£5.5bn), while operating profit was lifted from €9mn a year ago to €68mn. The group, which owns British Airways, Iberia and Aer Lingus, benefited from the earlier Easter break and a continued recovery in leisure travel, although the business market has been slower to bounce back.
IAG has been focusing on capacity increases where demand is strongest – up 14.4 per cent in Latin America, and 9 per cent in Europe, but activity in both its Asia Pacific and Africa, Middle East and South Asia regions remans weak.
And despite employee costs climbing by 14 per cent as it stepped up activity and implemented a new pay settlement, cash generation remained strong and net debt was cut from €9.2bn at the end of December to €7.4bn.
IAG’s shares rose by 1 per cent – although, like peers Air France-KLM (FR:AF) and Deutsche Lufthansa (DE:LHA), they still trade at a steep discount to their historic average, at just 4.6 times FactSet forecast earnings. Investors concerns about debt and the longevity of the post-pandemic bounce clearly remain.
IAG’s chief Luis Gallego remains confident, though, and the group is increasing capacity by a further 7 per cent this year.
RBC Capital Markets analyst Ruairi Cullinane also points out that, of the European airlines it covers, IAG is second only to Ryanair (IE:RYA) in margin performance, but is among the lowest rated in valuation terms.
Last IC view: Buy, 151p, 29 Feb 2024
