- International Consolidated Airlines Group SA (CDI)
- 03 May 2024 17:21:04
Source: Sharecast
JPM said that previously, it had concerns that high capacity growth in 2024 would lead to pricing and earnings pressure.
"Whilst the shares have underperformed since our UW call, in our view, it’s clear from the 2023 results that earnings are unlikely to decline this year," it said.
"We now see an opportunity for IAG to outperform consensus expectations despite the start of a re-investment cycle (higher opex/capex), which should then benefit longer-term earnings."
The bank said it now models flat unit revenues for 2024 and sits around 10% above Bloomberg consensus, with upside to estimates from strong leisure demand driving higher pricing.
It also noted that IAG is beginning a large re-investment cycle in 2024 which has the potential to drive sustainably higher EBIT margins from 2025 onwards.
JPM said British Airways EBIT is still around €500m below pre pandemic, with upside from capacity returning to 2019 levels and better operations/lower disruption costs.
Finally, it said that rapid de-leveraging has removed the pandemic balance sheet overhang and it forecasts "decent" free cash flow generation for 2024 despite high capex investment.
The bank lifted its 2024/25/26 EBIT estimates by 30%/33%/33% respectively, mostly due to higher revenues.
At 0900 GMT, the shares were up 4.7% at 148.50p.