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IAG, The Airline Most Exposed To US, Raises Its Potential To 37%

It was news that had been waiting for months and finally the US Government confirmed it this week. Traffic with vaccinated European travelers will reopen from November , and now the consensus expects this measure to be reciprocal as well and to be adopted in the European Union and the United Kingdom.

The good reception of this news is reflected in the airline sector where companies such as IAG – the most exposed in its income, with 17% in a normalized year such as 2019 and 30% of the group’s available seats – sign increases in the stock market that exceed 14% in two sessions.

Earnings for Air France-KLM are 6.9% and for Deutsche Lufthansa , 2%, after yesterday fell almost 4% after announcing on Monday a capital increase of 2.14 billion euros, with the aim of returning to the State party to the rescue as a result of the Covid, and that begins today. 13% of the revenue of the French airline comes from North America and in the case of the German one it is close to 20%.

British, the great beneficiary
While waiting for the European Union to adopt a similar measure, the increases among US airlines are somewhat more moderate. Almost 38% of United Airlines revenue comes from transatlantic flights. It is the most exposed company, although this is not why it has been noted in the price, which yesterday fell by 1.4% at the close of the session in Europe.

In the case of Delta Airlines and American Airlines – practically dedicated to chartering domestic flights – the routes to the other side of the Atlantic account for 15% and 10% of their revenues, respectively. “The best way to take advantage of this change is at IAG. This geographic segment is of particular relevance due to British Airways’ dominant position in the North Atlantic, with higher unit revenue and, therefore, higher profitability, supported by the business trips, “says Sabadell.

Since the news was released, seven analysis firms, according to Bloomberg , have updated their recommendation on IAG, all advising to buy shares, and with an average target price of 2.75 euros. This yields an additional 37% potential for the holding company. “IAG said it is ready to operate at 75% in the fourth quarter of the year and shows the accumulated demand that exists in all regions,” they point out from Bank of America that they also have IAG as their favorite option among airlines. This would imply raising IAG’s available capacity from 20% in the first half and from the 45% expected in the third quarter compared to 2019 .

British Airways is the airline that offers the most seats between London and New York, the most important route between the two continents. Specifically, according to OAG data, during August 2019, the British airline offered an average of 39,000 weekly seats, a figure that was reduced as a result of the restrictions to 9,870 in 2021.

The silver was taken, then and now, Virgin Atlantic, with 27,300 and 9,300 seats offered, respectively. The third place is for the American American Airlines, with an offer of 16,100 weekly seats in a normalized context, followed by United Airlines, Delta, JetBlue and the British Norwegian Air UK.

easyJet denies contacts with IAG
EasyJet CEO, Johan Lundgren, acknowledged on Tuesday that “there has been no rapprochement whatsoever on the part of IAG”, after Luis Gallego, president of the holding company , acknowledged that he was on “the radar”, in an interview with The Sunday Times last Sunday.

easyJet acknowledged having already rejected an offer from Wizz Air – a point that has not been disclosed. To continue independent easyJet announced a capital increase of 1,400 million euros .

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