IAG shares set to slump lower after €2.8 billion capital raise plan
IAG saw its share slide on Friday and could fall further next week after the airline group said it is planning a €2.8 billion capital raise to shore up its balance sheet due to the economic impact of Covid-19 on air travel.
International Consolidated Airlines Group (IAG) saw its share price slide on Friday by more than 4% and it could fall further next week after the company said it is looking to raise €2.8 billion via a rights issue in a bid to shore up its balance sheet.
In a statement, IAG said that no final decision has been made on whether the company will go ahead with the capital hike or when the rights issue will take place.
According to report by Reuters, IAG is allegedly looking at conducting the capital raise at the end of the summer season, allowing the business to strengthen its balance sheet and avoid a government bailout.
‘As detailed in its Q1 financial results announcement on 7 May, going into the crisis IAG had a strong balance sheet and liquidity with cash and undrawn facilities at 30 April of €10 billion,’ IAG said in a statement.
‘IAG has taken appropriate actions to strengthen its balance sheet and boost its liquidity position.’
IAG shares continue to fly south
The British Airways owner has seen its share price struggle since the start of year due to government-imposed lockdowns as a result of the Covid-19 pandemic which brought global air travel to a standstill.
The latest news flies in the face of analysts forecasts, with the average three-month price target for the stock sitting at 387p per share, which implies a potential upside of 48% for IAG. However, the chances of IAG shares soaring to such heights look increasingly unlikely given the challenging market conditions it and its peers face over the remainder of 2020.
IAG closed at 198p per share on Friday, with the stock down 68% year-to-date.
AMEX extends loyalty deal with IAG in £750 million deal
One bit of good news for the beleaguered airline group is that it has signed a new multi-year loyalty deal with credit card giant American Express valued at £750 million.
‘IAG Loyalty is a subsidiary of International Airlines Group that offers a wide range of services to IAG airlines and business-to-business clients,’ IAG said in a statement.
‘These include the Avios reward currency for the British Airways Executive Club, Iberia Plus, Aer Club and Vueling Club customer programmes and loyalty management tools.’
European airlines call for transatlantic air travel to resume
IAG and its peers on both sides of the Atlantic continue to urge EU leaders and US President Donald Trump to restore transatlantic air travel as soon as possible to help support the airline industry.
The heads of major carriers like US-based United Airlines, German-based Lufthansa and British Airways owner IAG reportedly sent a joint letter to US vice-president Mike Pence and the EU commissioner for Home Affairs Ylva Johansson urging them to permit transatlantic air travel.
However, with new coronavirus cases surging in the US, particularly in Texas, Florida and Arizona, while new cases have fallen significantly in Europe, the likelihood of both sides agreeing to lift the ban are slim.
How to trade stocks with IG
- Create an IG trading account or log in to your existing account
- Enter ‘International Consolidated Airlines Group’ in the search bar and select it
- Choose your position size
- Click on ‘buy’ or ‘sell’ in the deal ticket
- Confirm the trade
This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.
Act on share opportunities today
Go long or short on thousands of international stocks with CFDs.
- Get full exposure for a comparatively small deposit
- Trade on spreads from just 0.1%
- Get greater order book visibility with direct market access
See opportunity on a stock?
Try a risk-free trade in your demo account, and see whether you’re on to something.
- Log in to your demo
- Try a risk-free trade
- See whether your hunch pays off
See opportunity on a stock?
Don’t miss your chance – upgrade to a live account to take advantage.
- Trade a huge range of popular stocks
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See opportunity on a stock?
Don’t miss your chance. Log in to take advantage while conditions prevail.
Live prices on most popular markets