Airline conglomerate International Consolidated Airlines Group, made up of British Airways, Iberia, Aer Lingus, BMI, Vueling, and Level, is the company whose stock is being analyzed in this article. Like several other airlines stocks, the IAG share price took an unbelievable battering when the onset of the COVID-19 pandemic led to a shutdown of global aviation, effectively grinding its business to a halt for much of 2020.
The company is starting to see a recovery in its numbers. Still, the road to recovery has been laced with obstacles from several fronts, ranging from the emergence of new COVID-19 variants, changes in travel rules, and something as far-flung as 5G equipment at airports in North America. What is the IAG share price forecast as far as 2022 is concerned? This article will try to provide some insight as to what to expect.
The latest IAG share price news centres on the deal the company has struck with the owners of troubled airline Air Europa. IAG has agreed to provide a 100-million-euro unsecured loan to Globalia, which could be converted to a 20% equity stake in the latter’s Air Europa airline. The unsecured loan has a 7-year tenor and comes after the original deal for IAG’s Iberia to buy Air Europa in 2019 fell apart. The deal is subject to regulatory ratification from the consortium of banks involved.
Investors reacted positively to the news on Friday, pushing the IAG share price up from the session’s lows. That move also allowed the IAG share price to end the week on a higher note, gaining 6.74% at the close of trading on Friday.
The move also comes in the light of the company’s recent refusal to engage in a rights issue. Reuters cited CEP Luis Gallego as saying that the recovery in its flight bookings meant that IAG would not need a rights issue to bolster its financial position. Gallego, however, indicated that the company was not ruling out anything as the situation remained uncertain.
The consensus of industry analysts is that while IAG is expected to recover to its pre-pandemic price levels, the rise from the ashes is expected to be turbulent. Yes, the numbers appear to be recovering, as the company’s CEO admitted recently in statements captured by Reuters. But the recovery is seeing some significant headwinds.
In early March, the company said some of its Airbus A350 jets had suffered some surface degradation. CEO Luis Gallego told Reuters said that regulators had okayed the aircraft for continued operation, as they deemed the issue as not having an impact on the airworthiness of the company’s aircraft. Gallego said that the company had young aircraft and the level of the defects was not as bad as some other airlines were seeing. Qatar Airways had noticed the same issue but to a more significant degree and went into a court battle with Airbus over the problem with a threat to ground its Airbus 350 aircraft.
The pandemic has negatively impacted IAG’s foray into low-cost air travel. LEVEL was IAG’s solution to challenge its competition for low-cost, short-haul flights emanating from cities in Europe. The pandemic has truncated LEVEL’s operations out of Barcelona Airport (BCN). Operations at LEVEL-France have not restarted. Short-haul flights within Europe from its Vienna and Amsterdam bases were shut down in June 2020 and have not resumed.
Another identified headwind is the rise in energy costs. This phenomenon first crept into the markets in late 2021, when supply chain disruptions due to the pandemic caused supply constraints. Colder weather during the winter months also served to potentiate this effect. The Russian invasion of Ukraine has resulted in sanctions, which could keep 8% of the global oil supply off the markets.
German bank Berenger cited this factor as a headwind to recovering IAG share prices in its March 2022 outlook report on the stock. While the BA owner had experienced a faster-than-expected recovery, rising fuel costs would threaten its forecasts.
A poll of 11 institutional firms indicates that eight have provided a BUY recommendation for IAG, while three maintain a HOLD rating on the stock. This is a change from a year ago when 11 analysts had a BUY rating and 5 had a HOLD rating. The consensus price target is 198.58, also down from a year ago when the consensus price target was at 237.20.
The price targets set at one month, three months, and one year ago show that the consensus price targets are reducing. While the latest consensus price target remains above the current price of 141.92p and gives a potential upside of 40.31%, the gradually decreasing price targets indicate that analysts are not very hopeful of the company doing exceptionally well in the identified headwinds.
The price movement on the daily chart is occurring within the context of the large descending channel. The recent bounce seen on the daily chart took the price away from the 136.64 support. This move is now pushing towards the 143.94 resistance. This followed the truncation of the downside move from the bearish engulfing candles of 16/17 March. A break of the 143.94 resistance allows the bulls to aim for 149.72. Above this barrier, an advance move will have some space to negotiate before contacting 156.40 and 167.54. These are the additional targets to the north.
On the flip side, rejection at 143.94 allows for a retest of 136.64. If the bulls leave this support level undefended, we could see a breakdown towards the 124.48 support. 110.26 lies further south and will be waiting for the bears if they can extend the decline below 124.48.
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This post was last modified on %s = human-readable time difference 09:08