International Consolidated Airlines (LSE: IAG) started off well in February, after going nowhere much at all in January. But in the second half of the month, the IAG share price turned downward. And by the end of February, we were looking at a 5% drop for the month.
The airline operator brought us full-year 2021 results on 25 February, but the shares were already slipping before that date. Results day, though, did bring a one-off 5% price gain, but the shares resumed their fall the very next day. So what was in those results to justify the month’s drop? I didn’t see anything to worry me.
Many eyes were on passenger volumes in the fourth quarter, with the company having previously targeted 60% of 2019 capacity. In the event, IAG recorded a figure of 58%. That’s slightly below expectations, but hardly significantly. And it does represent solid progress from the 43% reported for Q3. Saying that, overall capacity for the full year reached only 36% of 2019’s levels. But given the year it was, I think I’m happy enough with that.
The Russian invasion of Ukraine can’t have helped in the final days of the month. It might perhaps seem a bit disproportionate worrying about the war’s effects on commercial aviation and on IAG’s outlook. And, yes, any shareholder hardship pales in comparison to the suffering of the Ukrainian people. But it’s still relevant to document the likely effect on the IAG share price.
The 2021 results themselves looked pretty good to me. Compared to 2020, total revenue increased 8.3% to €8.5bn. Admittedly that’s comparing to the worst year of the pandemic. But 2021 was still tough, and that’s heading very much in the right direction.
IAG reported an operating loss of €2.8bn, which might seem a bit painful. But it’s a huge improvement on the €7.5bn loss recorded for the previous year. The company also spoke of “significantly improved operating cash flow of €1.0bn in the second half of 2021, driven by positive EBITDA in quarter four, strong forward bookings and favourable working capital.”
IAG share price future
Positive earnings in the final quarter is a significant achievement. And it does suggest 2022 could be a much better year. Could it really be the year when the IAG share price finally manages a sustained upward run?
Speaking of its 2022 outlook, IAG “expects its operating result to be profitable from quarter two, leading both operating profit and net cash flows from operating activities to be significantly positive for the year“. That does, however, depend on there being “no further setbacks related to Covid-19 and government-imposed travel restrictions or material impact from recent geopolitical developments“.
Oil prices soaring
Then there’s the rapid, sudden increase in the oil price, which has pushed up above $110 per barrel. Again, that’s all part of the rest of the world’s response to Russian aggression and condemning it to the pariah status it deserves. And those developments are, surely, behind the February weakness in the IAG share price.
Had the tragic events of the past week not unfolded, I reckon we’d be looking at a more bullish market response. For now, once again, I’ll sit and watch IAG from the sidelines.
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Alan Oscroft has no position in any of the shares mentioned. 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.