Key points
- In 2021, losses before tax more than halved to €3.5bn
- The company expects passenger capacity to reach 85% of 2019 levels in 2022
- More countries, like Norway and Mexico, have removed all pandemic-related entry restrictions
I first bought shares of International Consolidated Airlines Group (LSE:IAG) in the depths of the pandemic. As an airline conglomerate owning brands like British Airways, the IAG share price had collapsed from 400p to 100p. Having continued to increase my position during market dips, I think there’s a great opportunity to buy more now. It currently trades at 139p, down 34% in the past year. As international travel grows again, recent results are beginning to show the company is recovering. Could purchasing shares be a good move for my long-term portfolio? Let’s take a closer look.
Recent results and the IAG share price
For the 2021 calendar year, the firm reported revenue of €8.4bn. This was an increase from €7.8bn the previous year, when international travel was also severely affected by the pandemic. What’s more, the company’s loss before tax more than halved from €7.8bn to just €3.5bn. It is important to note, however, that past performance is not necessarily an indicator of future performance.
Additionally, for the three months to 31 December 2021, losses narrowed significantly from €1.47bn to €278m. During this period, passenger capacity was 58% of 2019 levels, above the 36.1% figure for the entire year. Furthermore, the business expects passenger capacity to hit 85% of 2019 levels in 2022. This demonstrates the positive trajectory that international travel is now on following the Covid-19 pandemic.
An improving operating environment
We have seen in recent weeks a number of countries removing all pandemic-related entry restrictions. Norway was joined by Mexico and many others. This can only be good news for the IAG share price, because it likely means that more people will be willing to travel again.
On the other hand, however, the conflict in Ukraine has set oil prices soaring and this will inevitably impact the company’s purchase of jet fuel. Investment bank Berenberg raised concerns about this issue, but added that the conflict would not operationally impact IAG, because it is more focused on North American destinations. Transatlantic flights, for instance, are worth around $1bn to the business.
Aside from the reopening of borders, however, the business confirmed on 17 March, that it had agreed to provide a €100m seven-year loan to Globalia, a Spanish airline conglomerate. This agreement leaves open the possibility for IAG to convert the loan into a 20% stake in Air Europa, an airline the firm withdrew from acquiring during the pandemic and that Globalia owns.
This gives me confidence as a shareholder, because it shows the business is actively engaged in controlled and sensible expansion. The deal would give IAG the lion’s share of the Spanish aviation market.
Overall, I still like this company and I think the environment is improving markedly from the past two years. It now appears that international travel is almost back to normal, even though the IAG share price is still low. Today, I will be buying more shares during this dip for long-term growth. Is see the IAG share price as clear for take off!
