How Did the Cost-of-Living Crisis Impact IAG?

Travellers are returning to the skies, but the cost-of-living crisis might put more prominent airlines at a disadvantage as people look for bargains.

IAG to Join Budget Airlines Trend Despite BA Issues

All the airlines reported so far showed substantial growth compared to the prior year. Budget airlines have outperformed their mainline peers in any case. There isn't anything to indicate that International Consolidated will be any different from the trend. However, British Airways has faced a few additional challenges that might clear up soon, making the group a little more attractive. As for Iberia, there is still the issue of acquiring Air Europa.

British Airways has faced staff shortages at its main Heathrow hub, reducing the number of flights it can operate. With other strikes affecting the country and logistics, there is likely attention on what the airline can do to minimise interruptions. Additionally, operations in the far east have been mainly at a standstill until China confirmed its reopening. 

Iberia Pricing and Traffic Projections in Focus 

IAG's budget offering, Iberia, might be able to increase passenger numbers in a high-inflation environment, but that might contribute to reduced margins. Analysts expect the company to report an adjusted operating income of €457M for the final quarter of the year, with annual adjusted operating income forecast at €1.2B.

While passenger numbers have been improving, in its latest report, the airline is expected to still be below capacity levels in 2019. For that reason, capacity guidance could be top of mind for analysts. Additionally, fuel costs for the airline have nearly quadrupled over the last year, but with the price of crude coming down recently, it could help the company's bottom line. Despite already turning a profit in the previous quarter, the company's total debt still increased. Therefore pricing and traffic projections could be the make-or-break aspect of the earnings.

IAG Pullback Suggests Move to Predominant Trend

The stock price of IAG has been bullishly impulsive and remains biased up so long it maintains a position above $142. Its price action suggests it is pulling back for a correction, which may end up being a pennant, a flag or a triangle pattern. Currently, at $160, either scenario is possible, with a slide towards $150 invalidating the triangle. On the flip side, the short-term ceiling lies at $173, with a break higher opening the door to $183.

Source: Spreadex

Key Takeaways

IAG is feeling the heat from the cost of living crisis, with budget airlines experiencing substantial growth compared to the prior year. British Airways has faced staff shortages and strikes at its main Heathrow hub. Iberia, IAG's budget offering, may be able to increase passenger numbers in a high-inflation environment, but margins may suffer. Analysts have their eyes on Iberia's capacity guidance, fuel costs and traffic projections, as these are key aspects of the airline's earnings report.