BABWF - International Consolidated Airlines Will Fly Higher

2025-01-22 04:08:20 ET

Summary

• Q4 expectations include a 1.5% increase in Revenue per Available Seat Kilometer (RASK) and €775 million in core operating profit, supported by strong transatlantic performance.
• A £7 billion transformation program and new aircraft generation are expected to enhance margins and EBITDA, with a 250 basis points margin expansion.
• A deleverage path and an ongoing buyback still support IAG's valuation.

We had perfect timing on coverage of International Airlines Group (ICAGY) (BABWF). Since we initiated the company in June 2024, the stock price has risen more than 90% (Fig 1). As a reminder, our buy rating was supported by 1) the current aircraft supply chain disruption, 2) supportive long-haul capacity, and 3) balance sheet flexibility with a dividend reinstatement combined with a valuation discount versus peers. We also commented on the Q2 results, focusing on an additional upside, i.e., the IAG Loyalty Platform. This division will likely generate capital-light profit growth in the upcoming years. Today, we still believe there is a share price upside, and since our last update, the company reported its Q3 performance and disclosed the British Airways Investor Insight Day. ...

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