This is why FTSE 100 stock IAG’s share price is flying right now

FTSE 100 airline stock IAG’s share price is up around a fifth since the start of 2021. Here’s why it has shot higher again in end-of-week trading.

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The International Consolidated Airlines Group (LSE: IAG) share price has rocketed higher in recent weeks. Given mass vaccination rollouts, it’s perhaps no surprise. These have pulled infection rates down across the globe. These rollouts have raised the prospect of Covid-19 travel restrictions being walked back in the weeks and months ahead.

The IAG share price is up 22% since the turn of 2021. It’s a reading that smashes the 2% rise enjoyed by the broader FTSE 100 to smithereens.

The British Airways owner was up 5% in Friday business following the release of latest financials too. This UK share is now trading at its most expensive since early June at around 195p.  Here are the key points of IAG’s full-year trading statement.

IAG’s record losses

The headline numbers in Friday’s release were pretty jaw-dropping to say the least. In a year dominated by the global pandemic IAG recorded its biggest-ever operating loss of €7.4bn in 2020. This compares with the €2.6bn profit it racked up a year earlier.

Excluding exceptional items, operating losses came out at €4.4bn. These one-off items related to fuel and currency hedges, restructuring costs, and early retirement of some of its planes. These included its fleet of British Airways Boeing 747s and its Airbus A340s over at Iberia.

British Airways

Capacity last year stood at just 33.5% of 2019 levels. And this caused passenger revenues in 2020 to tank 75.5% year-on-year, to €5.5bn. In better news, IAG said turnover at its cargo business rose 16.9% in 2020 to €1.3bn.

Looking on the bright side

Capacity on its planes slid to just 26.6% of 2019 levels in Q4. And the firm said it expected levels to fall to around 20% for the first quarter of 2021. Capacity “continues to be adversely affected by the Covid-19 pandemic, together with government restrictions and quarantine requirements,” we’re told.

Uncertainty over the impact and duration of Covid-19 meant IAG declined to offer guidance for the full year. But comments from chief executive Luis Gallego were cautiously upbeat. “We know there is pent-up demand for travel and people want to fly,” he said. “Vaccinations are progressing well and global infections are going in the right direction.” He wants the aviation industry to be flying again, of course. To help this, he called for international common testing standards and the introduction of digital health passes. 

He added that “[IAG] continues to reduce its cost base and increase the proportion of variable costs to better match market demand. Were transforming our business to ensure we emerge in a stronger competitive position.” The FTSE 100 airline had €10.3bn of liquidity as of December, which was actually higher than at the start of the pandemic. This follows the €27bn rights issue of September and the £2bn loan from UK Export Finance (UKEF) in December.

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Royston Wild 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.

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