9 months ago • 2 mins
IAG reported on Friday that it finally made a profit last year, but the airline group’s other announcement kept investors grounded.
What does this mean?
If you’ve ever scanned for European flights while dreaming of a prosecco-filled summer vacation, you’ll probably recognize some of IAG’s carriers: British Airways, Iberia, and Vueling. Well, IAG’s been flying against a headwind for some time, racking up more than $10 billion in pandemic-induced losses. But now travel-hungry freedom-seekers are booking flights like they’re going out of style, and more business travelers are swapping their shirt-on-top, underpants-on-the-bottom Zoom meeting setups for boardrooms around the globe. IAG, then, made a profit last year after two dismal ones – and with the airline group expecting a full return to pre-pandemic capacity by the end of the year, IAG reckons its profit could almost double in 2023.
Why should I care?
For markets: Own the Spanish sky.
IAG had another announcement: it’s buying up the rest of Spanish airline Air Europa, picking up the deal that was scuppered by the pandemic back in 2020. Now, that might sound like a prime opportunity to nab more market share in the region, but investors aren’t fully sold. See, analysts reckon IAG’s massive debt pile has been weighing on the firm’s share price, and this deal will only make the dent bigger. That might be why IAG’s stock fell on Friday, despite the tip-top results.
The bigger picture: Prepare for a slow ascent.
Mind you, IAG’s tale is hardly an original story: the airline industry took a collective blow of $200 billion in losses over the last three years, but planes all over the world are finally taking off from the tarmac. It’ll take a long time to erase the past, though: the International Air Transport Association predicts carriers will make just shy of $5 billion in profit this year, a mere fraction of the more than $26 billion they made in the heady days of 2019.
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