The pandemic has inevitably caused a period of instability for the International Consolidated Airlines Group (LSE: IAG) share price. At the beginning of 2020, the stock was trading for just under 430p. Since then, nearly 70% has been skimmed off that price.
Last Friday made a further contribution to the stock’s downfall, with IAG shares dropping nearly 15% amid the emergence of a new, potentially more transmissible, strain of Covid-19. As I wrote yesterday, the FTSE 100 also saw over a 250-point fall. So, does this drop-off provide an opportunity for me to buy some shares? Let’s find out.
I have a few issues with IAG. The most pressing concern is the new Covid-19 strain, known as Omicron, that’s causing panic among investors. Originating in South Africa, as cases begin to crop up across Europe this is a massive threat to IAG. Scientists have said the UK should brace itself for hundreds of confirmed cases in the coming days. And should we continue to see a rise in cases, there’s always the possibility of the reintroduction of stringent travel restrictions. The UK has already begun to place countries back on the red list, and if further measures are taken, I think we can expect to see the IAG share price fall further.
The firm finds itself in a fragile position. Although its Q3 results showed that passenger capacity had increased (sitting at just over 40%), that’s nowhere near 2019 levels. Q3 also saw an operating loss of €452m, with IAG suggesting a total operating loss for 2021 close to €3bn. This was before the emergence of Omicron, so there’s potential for its results to be impacted further. When looking at an additional fall in the share price, this shows IAG has little room for manoeuvre. As a potential investor, these are off-putting signs.
There is, however, a beacon of hope in this. Investors are sensitive to the impact Covid has had on the market over the past 18 months – and that was reflected in Friday’s sell-off. However, the amount of information we have on Omicron and its potential threat is actually quite small – and the impact may not be as bad as we fear. After all, we’re better prepared this time round to combat the virus. We may also be offered some form of protection through vaccines. This means, for the current price of 133p, IAG may present itself as an opportunity for me to add cheap shares to my portfolio. I’d be lying if I said I was not tempted to buy.
Why I’m not buying
However, I deem IAG too much of a risk right now. The UK has seen the reintroduction of Covid measures, while other nations across Europe are also ramping up their protection. And I think we could see the IAG share price drop even more in the coming weeks and months. The 15% fall last Friday shows its sensitivity to Covid-19 news — and it’s for this reason that I am not looking to buy any shares at this current time.
Charlie Keough 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.