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IAG rises above revenue doubts, Credit Suisse says
International Consolidated Airlines Group (IAG) is rising above revenue doubts and is set for a strong summer, Credit Suisse said as it reiterated its 'outperform' rating on British Airways' parent.
IAG's strong performance in the first quarter eased concerns over its revenue outlook, Credit Suisse analysts said in a note. They left their price target unchanged at 721p and increased their estimate for IAG's annual pre-tax earnings before interest by 1% to 3.27bn (£2.9bn) - 5% higher than consensus.
IAG has added revenue from transatlantic flights despite increased competition from budget carrier Norwegian and IAG's UK-US market share increasing. IAG has made two offers to buy Norwegian.
The group's airlines' revenues were linked more closely to fuel prices than capacity growth this decade, the analysts said. "This inspires confidence in summer revenues as fuel prices rise," they added.
Strong summer trading would support confidence in IAG's free cash flow generation and its ability to distribute the cash, the analysts said.
IAG has not started its cash distribution plan for the year. It has 1.05bn to pay out through the dividend and buybacks "suggesting a sustainable 7% [dividend] yield" the analysts said.