Airline stocks were hit hard in 2020 with the onset of the Covid-19 pandemic. As flights ground to a halt, companies found themselves with no customers while still having to shell out millions each month in maintenance costs. The result of this was negative cash flows, growing debts, and crashing stock prices.

However, fast forward to 2022, and much of the lost flying time has been recouped. As people are free to travel again, I would expect airline stocks to be slowly climbing. Yet this hasn’t been the case. easyJet (LSE: EZJ), IAG (LSE: IAG), and Ryanair (NASDAQ: RYAA.Y) are down 40%, 33%, and 32% year to date respectively. Over a one-year span, the same stocks are down 49%, 35%, and 33%. So that being said, is now the time to buy back in?

Ready for take-off?

A big positive for airline stocks is the continuing increase in footfall. In 2019, just under 5bn people boarded flights. In 2020, this number fell all the way down to 1.8bn. However, in 2022, it’s forecast that just under 3.5bn customers will board flights, highlighting the impressive recovery. As this figure increases, it will help boost firms’ top lines, which I expect to be reflected in share prices.

Looking at company-specific results, I also see good news. IAG reported a profit for the three months to June 30 for the first time in two years. Ryanair posted a profit of £170m in its Q1 FY23 results too. Although easyJet recorded a loss of £110m for the same period, its revenues soared to £1.7bn, up from just £213m a year prior. In addition to this, its net debts shrank to just £200m, down from £600m in March 2022. These figures suggest to me the airline industry is in a more comfortable spot.

Not out of the woods yet

But there remain risks. A big threat that could continue to plague airlines is rising fuel costs. The Russia-Ukraine crisis sent the price of oil skyrocketing to over $120 per barrel. Currently sitting around the $100 mark, the price of jet fuel will inevitably have skyrocketed too, increasing operating costs and eating away at margins.

Another risk that airlines must overcome is rising inflation and how this is impacting workers’ wages. We’ve already been seeing union action regarding the erosion of pay in other travel industries. easyJet, Ryanair, and British Airways have all seen strikes this summer, and there’s no guarantee that these won’t continue.

Rising interest rates are also creating a harsh environment for stocks to thrive. I expect this bearish sentiment to be another reason why airline stocks have fallen.

Flying under the radar

Yet I think that airline stocks are back on the up. Shares have fallen due to rising fuel costs, the threat of industrial action, and the wider macroeconomy. However, with flight numbers rising, and industry leaders returning to profitability, I think now could be time to buy back in. As such, I’m looking at buying some UK airline stocks for my portfolio today.

The post Airline stocks: is now the time to buy back in? appeared first on The Twelfth Magpie.

More reading

• Could now be the time to buy great UK shares at bargain prices?
• easyJet shares are up 40% in a month. Here’s why
• Up 47% in a year! Now see what the booming IAG share price could be worth in 12 months
• Up close to 50% in a month, what’s next for the easyJet share price?
• The easyJet share price is up 49% in a month. What on earth’s going on?

Dylan Hood 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.

In 2022 the trend has been similar: year to date the shares are down 12%. However, with global travel restrictions easing by the day, does this mark the perfect time to get my hands on some cheap IAG shares? Or should I steer clear of the UK airline? Let’s take a look.

Headwinds for the IAG share price

Just as pandemic-related travel restrictions seem to be easing, war in Europe has begun. Virtually all flights into Russia and Ukraine have been stopped, and hence airlines like IAG have taken a hit.

Another threat that has stemmed from this tragic conflict is the rising price of oil. Just a few months ago, oil prices were sitting around the $80 per barrel mark. Today, that number has exploded to over $110. The rising oil price has led to fuel prices skyrocketing across the world, raising IAG’s costs and placing pressure on its income.

Finally, rising interest rates around the world could be bad news for IAG. As rates rise and economic growth slows, people are less likely to fork out money for luxuries like holidays.

Considering all three of these factors does make me worry over the future of the IAG share price

Reasons to be cheerful

While there are risks, there are also some positives I see for the stock. Firstly, excluding Russia and Ukraine, the world’s travel routes are beginning to open up again. In the first week of 2022, there were 139,422 flights in Europe. This is a near-100% increase from 71,738 during the same week in 2021.

These encouraging figures have filtered into IAG’s results. Its 2021 Q4 passenger capacity figure was at 58% of 2019 levels. While this might not sound great, it marks an impressive rise from the first quarter, which saw just 19% of 2019’s footfall. This translated into an 8.3% rise in year-on-year revenues that totalled €8.4bn. The firm still reported an operating loss of €2.7bn, but the rise in revenues does highlight that IAG is getting back on its feet.

The shares also look cheap to me. IAG currently trades on a price-to-sales (P/S) ratio of just 0.93. Competitors easyJet and Ryanair trade on P/S ratios of 1.79 and 4.3 respectively.

What I would do now

Although travel numbers look encouraging, there’s no guarantee that this will boost the IAG share price. Looking at the concrete facts, the firm is loss-making, oil prices are rising, and the macroeconomic climate is highly volatile. For these reasons, at the current IAG share price, I won’t be adding any of the stock to my portfolio.

The post The IAG share price is falling: is now the time to buy? appeared first on The Twelfth Magpie.

More reading

• Up 47% in a year! Now see what the booming IAG share price could be worth in 12 months
• 2 cheap FTSE 100 stocks that have P/E ratios below 10
• What might Middle Eastern peace mean for the IAG share price?
• Up 119% but with a P/E of just 6.6% – what’s going on with the IAG share price?
• 3 UK stocks to consider snapping up if the stock market crashes this month

Dylan Hood 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.

Recent results

IAG’s 2021 results were far from pretty. In fact, it reported an operating loss of around €2.7bn. At the same time, net debt increased another 20% from the prior year to reach €11.6bn. This means that if losses continue, it could lead to major trouble for the airline group. The IAG share price could lose more ground as a result.

But there are also some positive signs. For one, revenues increased 8.3% from 2020 to reach €8.45bn, demonstrating that demand started to return. In addition, operating losses have shrunk compared to the previous year, showing the benefits of the firm’s cost-cutting measures.

Finally, there’s also more optimism around the future. For one, current passenger capacity plans for 2022 are around 85% of 2019 capacity for the full year. The Omicron variant is also said to have had a minimal impact on bookings for Easter and summer. As people have been unable to go on holiday for a long time, I feel that there’s a possibility for demand to exceed the 85% figure, especially if there are no more large coronavirus outbreaks.

Not out of the woods yet

Yet there are still some worries around the pandemic. In fact, due to the waning immunity offered by vaccines, cases do remain high, especially in Asia. As such, there’s the worry that, even if all restrictions are lifted, some people will still be reluctant to travel. This would have a negative effect on the IAG share price.

And due to the extremely high price of oil, costs could soar. The company has not fully hedged oil and this is likely to strain profit margins. Even so, due to the current turbulent nature of oil, I hope that this is only a short-term problem.

Finally, the conflict in Ukraine has meant that UK carriers can’t fly over Russian airspace.  Although IAG has stated that this will only have a “minimal” impact on operations, it remains a concern, especially if the company has to start taking longer routes to avoid Russian airspace. 

Can the IAG share price beat the FTSE 100?

It seems certain that the IAG share price will be more volatile than many others in the FTSE 100, as the airline industry remains turbulent. But while this is a major negative, I think the cloud may have a silver lining, especially if demand increases for travel this summer. This could help boost investor sentiment. Therefore, although I recognise that there are many risks, I’m tempted to initiate a small position in IAG, as I feel it could outperform the FTSE 100 in 2022.

The post Can the IAG share price outperform the FTSE 100 in 2022? appeared first on The Twelfth Magpie.

More reading

• Up 47% in a year! Now see what the booming IAG share price could be worth in 12 months
• 2 cheap FTSE 100 stocks that have P/E ratios below 10
• What might Middle Eastern peace mean for the IAG share price?
• Up 119% but with a P/E of just 6.6% – what’s going on with the IAG share price?
• 3 UK stocks to consider snapping up if the stock market crashes this month

Stuart Blair 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.

Recent results

In the company’s third-quarter trading update, there were several promising signs. For example, passenger capacity in the quarter was 43.4% of 2019, up from 21.9% in the second quarter. While 43.4% is still underwhelming, it’s clearly a major improvement. Recent market data has also indicated that demand for flights in Britain is edging back to pre-pandemic levels for the summer period. This makes me expect further improvements, a factor that should boost the IAG share price.

Operating losses have also narrowed. For example, in the first nine months of 2021, IAG reported an operating loss of €2.5bn, down from nearly €6bn the year before. This shows the company has been effectively cost-cutting. Hopefully, this will increase its overall profitability post-pandemic.

Other factors

There are further indications that travel is continuing to recover to pre-pandemic levels. For example, in the UK, it’s recently been announced that fully vaccinated travellers no longer require a Covid-19 test on arrival. Further, both Norway and Sweden are allowing all passengers to enter, regardless of their testing or vaccination status. The continuing reopening of tourism around the world will certainly be a benefit for all airlines, including IAG.

Despite this, there are a couple of risks that do not concern the pandemic. For one, the tensions between Russia and Ukraine, could disrupt travel to Eastern Europe. Unlike some other airlines, such as Wizz Air, IAG’s business extends far beyond travel to Eastern Europe, so the impacts should not be too severe. Even so, it is still likely to have ramifications. And if the war we all desperately hope doesn’t happen actually breaks out, I believe the IAG share price will fall heavily as a result.

There is also the issue of the rising oil price, which has hit $90 per barrel recently. This will increase costs, which may force the airline to raise ticket prices or accept lower profit margins. Both these scenarios are certainly not ideal, especially as it attempts to recover from the pandemic.

Is the beaten-down IAG share price ready to fly?

Before the pandemic, the IAG share price stood at over 600p. This compares to its current price of around 160p. Due to issues of share dilution, increased debt, and the large losses the airline has incurred, a return to 600p over the next few years seems extremely unlikely to me. Even so, I believe there is certainly upside potential. This is because the general population seems very keen to go on holiday in 2022. For this reason, I’m adding IAG to my watchlist. 

The post Is the IAG share price ready to take off? appeared first on The Twelfth Magpie.

More reading

• Up 47% in a year! Now see what the booming IAG share price could be worth in 12 months
• 2 cheap FTSE 100 stocks that have P/E ratios below 10
• What might Middle Eastern peace mean for the IAG share price?
• Up 119% but with a P/E of just 6.6% – what’s going on with the IAG share price?
• 3 UK stocks to consider snapping up if the stock market crashes this month

Stuart Blair 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.

However, a combination of positive results and easing restrictions has given IAG new wind over the past few months, with the shares up 8.7% year-to-date. Can this trend continue? Let’s take a closer look.

Encouraging travel data

As mentioned, the global easing of travel restrictions over the past few months has vastly increased footfall across the travel sector. For example, in the first week of 2021, there were 71,738 European flights. Fast forward to the first week of 2022, that number almost doubled to 139,438. In addition to this, Skyscanner – an online travel booking agency – said that bookings for return flights to the UK this summer were up almost 400% in January compared to December.

These numbers have already filtered down into IAG’s business. In its latest trading update, it reported a passenger capacity jump from 21.9% to 43.3% of 2019 levels. In addition to this, its cargo transport has also seen a heft capacity rise, to 73.4% of pre-pandemic levels. IAG releases its full-year results on 25 February and if it sees more results like these, then I would expect the share price to increase further.

There is still significant progress to be made, but it seems that IAG is moving in the right direction. What’s more, Australia announced the reopening of its international borders last week. As confidence in the travel sector grows, the IAG share price could continue to climb.

Headwinds for the IAG share price

The most obvious challenge that IAG must contend with is the continuing threat the pandemic poses. Although restrictions are easing, there is still a high possibility that the virus could cause more disruptions throughout the year. If this is the case, it could place a lid on the growth of the IAG share price.

In addition to this, the pandemic left IAG with over €12bn net debt. This was the case across many other airlines, as the costs of maintaining grounded aircraft piled up. With interest rates creeping up, these debts could be quickly magnified unless addressed soon.

A final risk for the IAG share price is the steep competition that the firm faces from other flight providers. For example, competing airline Ryanair recently announced it would be offering big discounts to incentivise customers. This could draw IAG into a price war, which is the last thing it needs while trying to rebuild its business.

The verdict

Overall, the current IAG share price seem seems to me to be in a good place for growth right now. I think investors are realising the impacts of increased footfall, which is helping push the shares up.

However, with pandemic uncertainty and hefty debts on its plate, I’m not comfortable buying the stock just yet. I’m going to wait for the full-year results, and to see how IAG fares over the course of the next few months, before considering adding it to my portfolio.

The post Is the IAG share price about to take off? appeared first on The Twelfth Magpie.

More reading

• Up 47% in a year! Now see what the booming IAG share price could be worth in 12 months
• 2 cheap FTSE 100 stocks that have P/E ratios below 10
• What might Middle Eastern peace mean for the IAG share price?
• Up 119% but with a P/E of just 6.6% – what’s going on with the IAG share price?
• 3 UK stocks to consider snapping up if the stock market crashes this month

Dylan Hood 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.

The figures

Five years ago, the easyJet share price was around 1,044p. With £1,000, I would have been able to buy around 96 shares. Since this date, the share price has declined by nearly 40%. Therefore, my investment would only be worth £606 today, a fairly poor return, and far worse than the FTSE 100 return of nearly 5% in the same period.

Nonetheless, although dividends are no longer being paid due to the pandemic, easyJet used to offer large shareholder returns. Between 2017 and 2020, the firm paid dividends worth 197.2p per share. With 96 shares, this would equate to shareholder returns of £189.30. Therefore, a £1,000 return five years ago would total around £795 today, a loss of £205.

The future for easyJet shares

Due to the effects of the pandemic, the past five years have clearly been very negative for the airline, despite the fact that it has outperformed some others in the industry. Such a severe drop in the share price therefore seems justified. In fact, the company’s FY21 earnings were a loss before tax of over £1.1bn. But things are starting to look slightly more positive.

In fact, bookings for the second half of this financial year are ahead of pre-pandemic levels. And in the fourth quarter of this year, the firm expects that demand will return to near pre-pandemic levels. A full recovery is expected by 2023. If these forecasts are correct, I feel that this could result in significant long-term upside potential for the easyJet share price. But there is a big ‘if’, especially as the pandemic continues to cause such high levels of uncertainty.

Despite this uncertainty, easyJet looks financially strong, having £4.4bn of liquidity.  Hopefully, this will allow it to capture more opportunities. In fact, it has already obtained additional slots in Lisbon, Porto, and Gatwick. This is ahead the expected surge in demand later this year. After a couple of years of disruption, I’m also confident that demand for holidays will be strong later this year, and low-budget airlines will be a prime beneficiary.

As such, although issues such as inflation, high oil prices and coronavirus will certainly not make it easy, I feel that easyJet may finally be able to launch its recovery in 2022. The next five years seem more promising than the past five. This tempts me to buy easyJet shares.

The post If I’d invested £1,000 in easyJet shares 5 years ago, how much would I have now? appeared first on The Twelfth Magpie.

More reading

• Could now be the time to buy great UK shares at bargain prices?
• easyJet shares are up 40% in a month. Here’s why
• Up close to 50% in a month, what’s next for the easyJet share price?
• The easyJet share price is up 49% in a month. What on earth’s going on?
• At £5, could the easyJet share price still be a long-term bargain?

Stuart Blair 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.

Rolls-Royce (LSE: RR) shares were devastated by the pandemic, falling drastically from their pre-Covid level. However, in the last quarter, momentum seemed to have picked up for the firm, with the shares climbing to 144p during October.

This momentum quickly ended, however, with the announcement of the Omicron variant. The shares have slumped over 12% in the past 30 days as a consequence. Does this present me with a buying opportunity? Let’s take a closer look.

Rolls-Royce share price outlook

Rolls makes the majority of its money from servicing jet engines. As such, the constant travel bans have plagued share price growth. While things seemed to be easing, the Omicron variant has led to a resurgence in coronavirus regulations. Many long-haul flight routes have virtually halted. The bad news was felt across the travel industry, with IAG and EasyJet both seeing double-digit share price drops after the news broke. In addition to this, many analysts don’t expect the aviation industry to fully recover until 2024. If this is the case, it could place a lid on the future growth of Rolls-Royce shares.

However, the Omicron variant has also boosted government responses to the coronavirus. For example, in the UK Covid-19 booster jabs are now being rolled out at a much faster rate to combat the variant. With more and more of the UK population vaccinated, it’s likely that travel numbers will ultimately increase. This could help keep Rolls-Royce shares afloat.

I think the 2022 summer season could prove pivotal for the travel industry. If the sector can enjoy high capacity, then consumer sentiment may be restored. This could lead to more abundant travel throughout the latter half of 2022, speeding up recovery for the sector. This would be great news for Rolls-Royce shares. However, it’s contingent on governments tackling the virus effectively.

Economic problems

One thing that worries me about Rolls-Royce is the firm’s capital structure. It currently has over £4bn of debt on its balance sheet, largely from pandemic-linked loans to keep the firm afloat. The reason this worries me is tied to the direction of the UK economy. Inflation has been steadily creeping up of late, with UK consumer price inflation (CPI) hitting 3.8% over the past 12 months. This is almost double the UK’s target of 2%. Due to these high increases, many investors are expecting an increase in interest rates. If this occurred, it would add to Rolls’ debts.

In just over a week, Rolls will release a trading update. I think this will prove pivotal for the direction of Rolls-Royce shares. In addition to this, it will show investors if the recent addition of Anita Frew as a non-executive director might be making an impact. Frew has chaired multinational chemicals company Croda International for the last five years, delivering huge success. If the report contains some good results, I’d hope that Frew’s impact on Rolls’ management could lead to some great longer-term growth for the firm.

Overall, although Rolls-Royce shares do look cheap to me, I’m not confident enough to buy just yet. I’ll be waiting eagerly to see the firm’s trading update before I consider adding the stock to my portfolio.

The post Should I add Rolls-Royce shares to my portfolio today? appeared first on The Twelfth Magpie.

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Dylan Hood has no postition 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.

Last Friday made a further contribution to the stock’s downfall, with IAG shares dropping nearly 15% amid the emergence of a new, potentially more transmissible, strain of Covid-19. As I wrote yesterday, the FTSE 100 also saw over a 250-point fall. So, does this drop-off provide an opportunity for me to buy some shares? Let’s find out.

IAG concerns

I have a few issues with IAG. The most pressing concern is the new Covid-19 strain, known as Omicron, that’s causing panic among investors. Originating in South Africa, as cases begin to crop up across Europe this is a massive threat to IAG. Scientists have said the UK should brace itself for hundreds of confirmed cases in the coming days. And should we continue to see a rise in cases, there’s always the possibility of the reintroduction of stringent travel restrictions. The UK has already begun to place countries back on the red list, and if further measures are taken, I think we can expect to see the IAG share price fall further.

The firm finds itself in a fragile position. Although its Q3 results showed that passenger capacity had increased (sitting at just over 40%), that’s nowhere near 2019 levels. Q3 also saw an operating loss of €452m, with IAG suggesting a total operating loss for 2021 close to €3bn. This was before the emergence of Omicron, so there’s potential for its results to be impacted further. When looking at an additional fall in the share price, this shows IAG has little room for manoeuvre. As a potential investor, these are off-putting signs.

IAG positives

There is, however, a beacon of hope in this. Investors are sensitive to the impact Covid has had on the market over the past 18 months – and that was reflected in Friday’s sell-off. However, the amount of information we have on Omicron and its potential threat is actually quite small – and the impact may not be as bad as we fear. After all, we’re better prepared this time round to combat the virus. We may also be offered some form of protection through vaccines. This means, for the current price of 133p, IAG may present itself as an opportunity for me to add cheap shares to my portfolio. I’d be lying if I said I was not tempted to buy.

Why I’m not buying

However, I deem IAG too much of a risk right now. The UK has seen the reintroduction of Covid measures, while other nations across Europe are also ramping up their protection. And I think we could see the IAG share price drop even more in the coming weeks and months. The 15% fall last Friday shows its sensitivity to Covid-19 news — and it’s for this reason that I am not looking to buy any shares at this current time.

The post The IAG share price fell 10% last week. Is this an opportunity for me to buy the shares? appeared first on The Twelfth Magpie.

More reading

• Up 47% in a year! Now see what the booming IAG share price could be worth in 12 months
• 2 cheap FTSE 100 stocks that have P/E ratios below 10
• What might Middle Eastern peace mean for the IAG share price?
• Up 119% but with a P/E of just 6.6% – what’s going on with the IAG share price?
• 3 UK stocks to consider snapping up if the stock market crashes this month

Charlie Keough 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.

Massive loss 

Let’s get those grim numbers out of the way. Due to ongoing restrictions, passenger capacity over the first six months of 2021 was just under 22% of that seen over the same period in 2019. Accordingly, revenue from travellers tumbled 72.3% to just €1.14bn. This left total revenue at €2.21bn (down 58.2%). 

Naturally, IAG’s bottom line suffered in tandem. A massive post-tax loss of €2.05bn was logged. 

Where next for the IAG share price?

As with most stocks, I believe there are both bull and bear points to the IAG investment case. One reason to be optimistic is that the aforementioned pre-tax loss was actually far less than reported over the same period in 2020 (€3.81bn). So, things really are improving, albeit very slowly.

Second, news that fully-vaccinated flyers from the US and EU ‘amber countries’ will not be required to quarantine when arriving in the UK is clearly a shot in the arm for the company and its peers. I certainly don’t think anyone can reasonably deny that there’s an awful lot of pent-up demand from people to travel abroad. It really is just a question of time.

From a financial perspective, the FTSE 100 airline also looks to have taken all the steps it can. Today, IAG said it had €10.2bn in liquidity at the end of June thanks, in part, to recent oversubscribed bond issues, cost-cutting and a deferral of pension contributions.

Reasons to be cautious

On the flip side, the ongoing uncertainty with regard to just how the next few months will play out means that IAG still isn’t able to provide the market with guidance on full-year profits. The only prediction the company was willing to make is that capacity in Q3 is expected to be around 45% of 2019 levels.

That’s clearly better than that seen over H1. However, it also underlines just how far off a full recovery really is. Nor can it be guaranteed, which means the IAG share price will likely remain volatile for a while. 

IAG’s creaking balance sheet is another worry for me. Net debt hit £12.1bn at the end of June — up 24% on this time last year. Sure, all airlines are suffering. Even so, the financial position looks worse compared to other London-listed airlines such as Wizz Air. I certainly wouldn’t be expecting dividends for a while if I held the shares. Moreover, the post-Covid-19 trading environment will surely be just as competitive as it was before the pandemic struck. 

Still risky

Anyone buying the stock this time last year would be registering a gain of around 47% before markets opened. This is a great result and highlights how having a contrarian mindset can really pay off. Nonetheless, I wonder if the IAG share price is now firmly up to date with events. 

As opportunities go, IAG still doesn’t make the cut for me and I won’t be buying now. In my view, there are other FTSE 100 companies offering arguably as much upside for much lower risk.

The post The IAG share price falls: opportunity or warning? appeared first on The Twelfth Magpie.

More reading

• Up 47% in a year! Now see what the booming IAG share price could be worth in 12 months
• 2 cheap FTSE 100 stocks that have P/E ratios below 10
• What might Middle Eastern peace mean for the IAG share price?
• Up 119% but with a P/E of just 6.6% – what’s going on with the IAG share price?
• 3 UK stocks to consider snapping up if the stock market crashes this month

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Wizz Air Holdings. 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.

Taking a quick look at International Consolidated Airlines Group‘s (LSE: IAG) share price lately, I’m beginning to spot some turbulence. Despite these blips on the radar though, this Anglo-Spanish airline holding company is up this year. As of 26 May, it is trading at around 202p, up an impressive 27% from 159p a year ago.

As an investor looking for a less volatile travel play, IAG shares might be just the ticket. Having seen its stock price crash land in February 2020 from an all-time high of 457p, could it still have plenty of runway to go?

Looking at IAG’s financials

IAG shares were the worst-performing in the FTSE 100 in 2020, and they tend to perform badly when the Footsie does.

It’s also no secret that money is tight as air travel remains restricted. In Q1 this year, IAG reported a net loss of €1.7bn. However, these losses were down almost 37% from Q1 2020. IAG’s liquidity also remains at an impressive €10.5bn, a slight increase from the same time last year. This is due to bond issuances, revolving credit facilities, and reduced costs. 

But there’s no ignoring the elephant in the room. Passenger capacity is running at 20% of 2019 levels. IAG is also anticipating a figure of 25% for the second quarter of the year.

IAG’s share price potential

Although airlines remain crippled, IAG can take some solace from a number of positives. Its cargo operations improved by 35% quarter-on-quarter, taking in revenues of €350m. Though this is but a small dent in the grand scheme of things, it’s an improvement nonetheless. What’s more, IAG has been investing in making its fleet more efficient. By dumping older plane models such as 747s, it could make profitability easier in the future. 

Also, as things stand, we are in the end game of this pandemic — touch wood. Vaccinations are proceeding in the UK at a rapid rate, with Europe beginning to catch up. This has led to a rapid reopening of the economy, with air travel returning across the globe. As one of the largest airline groups in the world by passengers carried, the only way is up from here — barring any renewed lockdowns. 

Risks to IAG shares

There are, unfortunately, too many risks to choose from to put them all down here. Even at the best of times, the aviation industry is a challenging one for investors. Volatile fuel costs, industrial action, geopolitical tensions, terrorism and the usual economic cycle are all headwinds.

What’s more, IAG’s stock price may suffer in the future thanks to its ever-increasing debt. By the end of March, net debt stood at €11.5bn, up 18% from last year. With air travel not expected to return to pre-pandemic levels until at least 2024, it will be hard for IAG to generate enough profit to actually pay this back before too much interest accrues. 

So, is IAG a buy?

Is IAG a buy? This is a genuinely tough one for me. On the one hand, I am a big fan of IAG; I believe it has weathered the pandemic well and that it is still cheap compared to all-time highs. However, its rising debt levels and the uncertainty around air travel just make it too much of a risk for my portfolio right now.

The post Should I Invest in IAG shares right now? appeared first on The Twelfth Magpie.

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Jamie Adams has no position in IAG. 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.