Key points
For the 2021 calendar year, operating losses narrowed to €2.7bn from €7.4bn in 2020
Revenue is up 8.3% to €8.5bn, on a year-on-year basis
More countries, like Norway, are completely removing pandemic-related entry restrictions
Every airline business has suffered during the Covid-19 pandemic and International Consolidated Airlines Group (LSE: IAG) is no exception. As the world shut down, passenger numbers and capacity were a small fraction of 2019 levels. As the pandemic retreats, however, I now think that this industry could be an excellent place to look for future growth. As a current shareholder, I want to know where the IAG share price is headed next. Let’s take a closer look.
Encouraging results and the IAG share price
Just last week, the company released its 2021 calendar year results. They showed that operating losses had narrowed to €2.7bn from €7.4bn the previous year. Furthermore, revenue increased by 8.3% to €8.5bn. Both of these results give me a lot of confidence that the airline industry is slowly getting back to its feet.
On a more practical front, passenger capacity increased to 58%, compared with 2019 levels, for the fourth quarter of 2021. This had risen from 43.4% in Q3 and 21.9% in Q2. What’s more, the firm anticipates that capacity will reach 85% this year.
Simply put, the results are beginning to show that people are returning to the skies in large numbers. This can only be a good thing for the IAG share price, which is currently trading at just above 151p.
The reopening of borders
This month, a number of countries stated they were removing all pandemic-related entry restrictions. One such country was Norway, and Sweden and Switzerland soon followed. Indeed, investment bank Liberum stated that it “remains optimistic” about “the relaxation of travel curbs”. It issued a ‘buy’ rating this month.
IAG also benefited from the November 2021 reopening of the US border. The transatlantic routes flown by IAG’s airlines are estimated to be worth around $1bn per year for the company. This led Citi to favour IAG over short-haul carriers and it recommended purchasing shares in the firm in January 2022.
The pandemic has left its mark on the airline business, however, and JP Morgan is concerned about future equity issuances. These would be to help tackle the company’s not insignificant debt pile of €13bn. I do factor this debt into my investment decision. However, I think the mass return of passengers to the skies should go some way to placing IAG back into a financially stable position.
Having owned shares in IAG throughout the pandemic, I know only too well the difficulties the firm has faced. With borders reopening, however, the situation appears to be returning to normal. Recent passenger data supports this view. I will be adding to my current holding without delay.
The post The IAG share price: where will it go next? appeared first on The Motley Fool UK.
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Andrew Woods owns shares in IAG. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Citigroup is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
