Up 28% in 3 months, the IAG share price is starting to take off. But will it last?

The International Consolidated Airlines Group (LSE:IAG) share price is now 58% above its 52-week low. There’s a number of reasons why this good run is likely to continue.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The International Consolidated Airlines Group (LSE:IAG) share price has done well lately. Since the end of June, it’s been the best performer on the FTSE 100.

And here’s why I think this rally isn’t over yet.

Created with Highcharts 11.4.3International Consolidated Airlines Group PriceZoom1M3M6MYTD1Y5Y10YALL1 Oct 20194 Apr 2025Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '25202020202021202120222022202320232024202420252025www.fool.co.uk

More air travel

According to the International Air Transport Association, there will be 4 billion more journeys in 2043, than in 2023 — an annual growth rate of 3.8% per annum.

Should you invest £1,000 in Spirax-sarco Engineering Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Spirax-sarco Engineering Plc made the list?

See the 6 stocks

If IAG could match this, it would mean an extra 200m flights sold in 2043.

During the year ended 31 December 2023 (FY23), revenue per flight was €223. If this was the same in FY43, additional annual turnover of €44.6bn (127%) could be generated.

Lower fuel costs

In FY23, fuel, oil and emissions charges accounted for 29.1% of operating costs.

Not surprisingly, the price of jet fuel closely matches that of Brent crude. With a barrel of oil currently (30 September) costing around 20% less than it did a year ago, this should help boost earnings.

Some of this positive impact is offset by the fact that IAG buys a proportion of its fuel needs in advance at a fixed price. However, it doesn’t hedge all of its requirements so there will be some benefit from falling oil prices.

Reduced interest payments

Like most airlines, IAG is carrying a lot of debt. At 30 June 2024, it was €16.1bn.

Some of this attracts interest at a variable rate. With the cost of borrowing starting to fall, this should help reduce interest costs. These were €1.1bn in FY23.

Lower landing fees

Another positive is the Civil Aviation Authority’s decision to reduce the cap on landing fees that can be imposed by Heathrow Airport.

For 2025, the airport can charge a maximum of £23.73 a passenger, a reduction of 6% on previous amounts. A similar ruling has been made for 2026.

British Airways holds 52% of all slots at Heathrow. The reduction in landing fees will have a major impact.

On the flip side

However, it’s not all good news (unless you work for the group). In FY23, employee costs were equal to 20.9% of total operating expenses.

In August 2023, British Airways agreed a 13.1% pay rise (over 18 months) for its 24,000 workers. And in Ireland, a long-running series of strikes by Aer Lingus pilots was ended after a 17.75% increase in pay was agreed.

Further industrial action across the group cannot be ruled out.

Should I buy?

On balance, I feel now could be a good time to consider investing in IAG.

But there are risks. The aviation industry is one of the worst for greenhouse gas emissions which could make it vulnerable to additional taxes or penalties.

Also, another pandemic could be more devastating than the previous one.

And although it will shortly be paying a dividend again — the first since December 2019 — it’s not going to get income investors excited.

But there’s no sign of a fall in aviation demand. Even if in-person business meetings are increasingly falling out of fashion, I think people will always want to go on holiday and visit new places. In addition, we’ve seen how some of the group’s principal costs are moving in the right direction.  

Therefore, the next time I’m in a position to invest, I’m going to seriously consider taking a stake.

Should you buy Spirax-sarco Engineering Plc shares today?

Before you decide, please take a moment to review this first.

Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.

It’s called ‘5 Stocks for Trying to Build Wealth After 50’.

And it’s yours, free.

Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.

And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.

That’s why now could be an ideal time to secure this valuable investment research.

Mark’s ‘Foolish’ analysts have scoured the markets low and high.

This special report reveals 5 of his favourite long-term ‘Buys’.

Please, don’t make any big decisions before seeing them.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Beard 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.

More on Investing Articles

Investing Articles

Prediction: 12 months from now, £5,000 invested in Tesla stock could be worth…

Tesla stock has endured a miserable year so far, falling by 29%. Muhammad Cheema takes a look at how it…

Read more »

Investing Articles

See what £10,000 invested in Tesla shares at their mid-December peak is worth today 

As the world absorbs the full scale of Donald Trump's tariffs, Tesla shares are reeling. Investors who bought the stock…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »

Investing Articles

2 things to remember when stock markets are turbulent

US trade policy has rattled the stock markets in New York, London and elsewhere. Our writer outlines a couple of…

Read more »