The last five years have been pretty terrific for International Consolidated Airlines (LSE:IAG) shares. After tanking in the wake of the pandemic, the long-haul airline enterprise has been steadily getting things back on track. And after a prolonged period of restructuring and cost-saving initiatives, its share price has finally started taking off. In fact, any investor who decided to snap up £1,000 worth of shares in July 2020 is now sitting on an impressive £2,400 – a 140% return.
With momentum returning to the airline operator, it may not be long before IAG, as it’s known, returns to pre-pandemic highs. So with that in mind, is this a stock that British investors should be considering right now? Let’s explore.
More growth to come?
A quick glance at the broker forecasts for IAG shares reveals a clear signal – institutional investors believe this stock’s on track to rise higher. There are a variety of opinions. But right now, the average consensus is that the stock price will reach around 422p by this time next year. That’s the equivalent of a 22% projected gain in the space of 12 months.
Digging deeper, this optimism’s being driven by several key factors. The growth so far has been in large part driven by a worldwide recovery of passenger volumes within the aviation industry.
However, with the completion of its £7bn transformation programmes, IAG continues to show margin improvement at British Airways, on track to reach its 15% medium-term target. And combining higher passenger volumes with greater profitability is seemingly giving the business an edge over its European rivals like Deutsche Lufthansa and Air France KLM.
Pairing all this with the surge in free cash flow generation, IAG’s dividends also made a welcome return as of 2024, along with a €1bn share buyback programme. Needless to say, this is all fantastic news for shareholders.
Risk versus reward
It’s hard not to be encouraged by the progress IAG’s made in the last few years. But there are still plenty of challenges that lie ahead. And even the most optimistic institutional investors have some reservations.
Concerns of a global economic slowdown have emerged following the announcement of new US tariffs earlier this year. It’s still unclear how impactful this new economic policy will be. But if fears prove accurate and the US, UK, and European markets suffer, demand for transatlantic flights could suffer. And since IAG’s heavily reliant on this higher-margin travel route, recent gains in profitability could be undone.
There’s also the ever-present question of fuel costs, which make up around a third of the firm’s annual expenses. Jet fuel prices are on a downward trend in 2025. But a sudden surge in underlying oil & gas prices could quickly change that, adding even further pressure on IAG’s bottom line.
All things considered, IAG shares seem to offer a lot of potential, especially since the forward price-to-earnings ratio is just a tiny 6.4. So for investors seeking exposure to the travel industry, this might be a business worth considering.
