IAG share price could fall below 179p support level, says IG analyst

IAG could see its share price fall to new lows amid unions threatening strike action over job cut plans and concerns over a second wave of Covid-19 cases in Europe that could see European governments reinstate lockdowns.

International Consolidated Airlines Group (IAG) could see its share price fall to new lows amid unions threatening strike action over job cut plans and concerns over a second wave of Covid-19 cases in Europe that could see European governments reinstate lockdowns.

IAG closed 2.8% lower on Wednesday to 184p per share, with the stock down 70% year-to-date.

IAG: technical analysis

Shares in IAG have been on the slide over the past two-months, with the stock approaching the lows seen back in May, according to Josh Mahony, senior market analyst at IG.

‘As things stand we appear to be finding some support on the March low of 179p, yet further downside could yet be around the corner as news flow continues to depress the price,’ he said.

‘There is a possibility that we are looking at a retracement of the 148p rally, yet with price having cleared out all the Fibonacci levels, the chances of another multi-year low are growing, Mahoney added.

‘As such, any bullish outlook would require a break through the prior swing-high (currently 233p). Until then, further downside looks likely as we close in on the prior low of 148p.’

IAG considers €2.8 billion capital raise to strengthen balance sheet

The British Airways owner will likely see its stock price diluted and its shares fall in value if it goes ahead with a €2.8 billion rights issue later this year in an effort 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 a 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.’

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, while cases are falling in Europe, the likelihood of both sides agreeing to lift the ban are slim.

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