IAG shares remain flat but CEO eyes recovery through consolidation
The IAG share price could stay grounded for the rest of 2021 amid ongoing travel uncertainty, according to boss Luis Gallego. He said on Wednesday that consolidation may be the only way for airlines to survive.
- IAG share price down 11% this month.
- Uncertainty continues to hamper the group’s recovery.
- Can consolidation help IAG shares gain momentum?
- Ready to trade the IAG share price? Open an account today
IAG shares opened at 203.20p on 28 May and quickly dropped 1.45% to 200.25p within the first hour of trading. The day’s early downward movement is indicative of the bearish trend that’s gripped the IAG share price in May. Although the last five days have produced some positive movements, shares in International Airlines Group (IAG) have struggled to gain any traction over the last four weeks.
How have IAG shares fared in May?
Coming into May, the IAG share price was above 200p. It spiked at 213.20p on 7 May before dropping 11% on 17 May to a monthly low of 189.68p. These peaks and troughs are higher than they were six months ago, which is a positive. With the UK moving towards a complete lifting of all Covid-19 restrictions, travel has resumed in some capacity. However, the recent movements show that IAG remains under pressure.
CEO Gallego confirmed this in a webinar on 27 May during which he discussed the future of IAG and, moreover, the industry in general. He confirmed that the company will have a ‘huge amount of debt’ when the current crisis is over. Travel bans and increased costs associated with Covid safety measures mean that IAG and its competitors will be ‘smaller for some time’.
What is the future for flying?
The data supports this claim. IAG reported in mid-May that passenger capacity for Q1 was one-fifth of what it was in 2019. With a pre-tax loss of £1.6 billion already this year, IAG shares have suffered but so too has the industry as a whole. Gallego believes the only way forward is the merging of assets.
In his mind, there may only be two or three carriers per continent in the next few years. Indeed, even though aviation experts believe passenger volumes will return to normal by 2023, business travel is likely to remain 15% lower than in 2019. IAG’s British Airways and Iberia derive a lot of their revenue from business travel.
The switch to online meetings and video chats is likely to make air travel an ever-decreasing luxury for businesses. This could fuel a major consolidation effort, something IAG would ‘participate in’, said Gallego. This statement could offer some promise for IAG shares. The airline industry is in need of change and Gallego’s comment suggests that IAG will be actively looking to consolidate with other carriers in the coming years.
Could consolidation help the IAG share price?
The current consensus IAG share price target among analysts is £209.20. That, coupled with a buy rating, suggests that positive changes could be on the horizon.
The recent trend has been flat, but consolidation could trigger a bull run. However, with travel still on lockdown in many ways, it may be some time before we see IAG make moves that will bolster its bottom line.
Can IAG shares bounce back once restrictions lift?
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