Worldwide Consolidated Airways Group (LSE: IAG) shares have had a turbulent decade. The British Airways proprietor virtually went to the wall through the pandemic as world fleets have been grounded, and it was solely saved by a mighty €2.74bn rights concern and piles of debt.
In September 2022, the share value fell beneath £1. Traders who boarded considering they have been bagging a discount wanted sturdy nerves, however inside two years, they’d greater than quadrupled their cash. With the shares at £4.30 immediately, a £10,000 funding on the lows would have swelled to roughly £43,000. That’s a 333% capital achieve. Momentum has cooled, however the inventory continues to be up 30% over 12 months.
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Flying FTSE 100 development inventory
The valuation for IAG, because it’s generally known as, now not appears distressed. The value-to-earnings ratio is round 9, properly above the rock-bottom a number of of three or 4 at the beginning of the restoration, but nonetheless modest for an organization with sturdy money flows.
As flying rebounded, the group repaired its stability sheet at tempo. In 2024, free money circulation climbed to €3.56bn, up from €3.02bn in 2023. That helped minimize web debt by one other €1.73bn. Web debt is down from a peak of round €13bn in 2020 to €7.5bn on the half-year stage in 2025 (30 June).
Dividends have returned, albeit with a modest trailing yield of about 1%. The group can be shopping for again shares. Within the first half of 2025, it returned €1.5bn to shareholders by way of dividends and share buybacks.
Not all airways have soared. Price range provider easyJet, additionally within the FTSE 100, continues to search out circumstances more durable given its heavier publicity to price-sensitive European customers. In contrast, IAG advantages from resilient premium transatlantic site visitors, significantly enterprise and high-end leisure travellers. Its different airways, together with Iberia and Vueling, have additionally been regular.
It’s full-year outcomes time
On Friday (27 February), the group publishes full-year outcomes. In 2024, working revenue jumped 27% to €4.44bn on revenues up 9% to €32.1bn. It really picked up pace within the first half of 2025, with working revenue up 43.5% to €1.88bn. Revenues rose 8% to €15.9bn. Decrease gasoline prices and beneficial overseas trade actions helped, though there have been hints of moderation within the second quarter.
Consensus forecasts level to full-year 2025 working revenue of roughly €4.7bn to €4.9bn. The market can even search for excellent news on margins, additional debt discount, dividend and buyback generosity and a optimistic 2026 outlook. Expectations are excessive although. Any miss will probably be punished.
A low-ish P/E doesn’t mechanically sign a discount as aviation stays an inherently dangerous enterprise. Pandemics, wars, volcanic ash clouds or placing air site visitors controllers can all disrupt earnings at quick discover. The US economic system has been sturdy, supporting profitable North Atlantic routes, although uncertainty lingers.
I nonetheless suppose IAG shares are price contemplating, however solely with a long-term view. The explosive post-Covid rebound might be behind us and development more likely to normalise. Even so, with ongoing deleveraging, dividend development and buybacks, the rewards ought to proceed to land. Friday’s outcomes ought to inform us extra.
