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The IAG share price is the ultimate dirt-cheap FTSE 100 bargain! Here’s what I’d do now

International Consultated Airlines Group (LSE: IAG) has been hammered by the stock market crash but the IAG share price is flying today.

It is up more than 8% as investors decide now is a good time to take a little risk to generate an outsize reward. The IAG share price is certainly tempting, having lost an incredible 66% of its value since the start of the year. The FTSE 100 as a whole is ‘only’ down around 20%.

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The owner of British Airways, Iberia, Aer Lingus, and others is now a dirt-cheap stock. The big question now is how the IAG share price will perform in the recovery.

Some investors have gone bargain hunting in this beaten-up sector, while others have followed the example of Warren Buffett. He recently dumped his entire $4bn stake in US airlines stating, that “The world has changed for the airlines. And I don’t know how it’s changed”. I’m not sure many people do.

The IAG share price may stay grounded

Investors have been asking whether holidaymakers and business travellers will recover their appetite for hopping onto planes after Covid-19. Now they are confronting another question: how long is the pandemic going to stick around?

Right now, the answer seems to be longer than everybody thinks. Investors should buckle up for the long haul, as the IAG share price may stay low for some time. Airlines don’t expect demand to return to 2019 levels until 2023, another three years away. In the meantime, they have huge fixed costs. Survival isn’t guaranteed, in their current form. At least IAG is taking the opportunity to restructure.

Anybody who is tempted by the IAG share price is taking a gamble. There are too many unknown unknowns to make a rational assessment of its worth. Its stock is likely to be turbulent for some time, as sentiment holds sway.

While many people would love to fly off for the summer, confusion is rife. Where are you allowed to fly? Will you need to wear a face mask when you get there? Or quarantine when you get back? And will your travel insurer reimburse you if you catch Covid-19 before you fly? Or afterwards? No wonder staycations are big business this year. This all hits the IAG share price.

FTSE 100 bargain or trap?

I suspect business travel will take even longer to bounce back. After months of working from home, it will be hard for businesses to coax employees back onto a plane. Especially now they have Zoom. This will hit the IAG share price harder than the budget carriers.

Throw in climate change and emission concerns, and IAG has a long journey ahead of it. On the plus side, it boasts a strong balance sheet and liquidity, with cash and undrawn facilities of €10bn on 30 April. The downside is net debt of around €7.5bn.

I would love to say pile into the dirt-cheap IAG share price today, but it is too risky for me. You might be made of sterner stuff.

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Harvey Jones 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.