British Airways Owner IAG Jumps on Iberia Outlook: London MoverRobert Wall
International Consolidated Airlines Group SA rose for a second day to the highest price since August 2011 as analysts predicted that a reorganization at the Iberia unit in Spain will succeed as the country’s economy improves.
“There is growing confidence management can push through the restructuring plan at Iberia,” Robin Byde, a London-based analyst at Cantor Fitzgerald, said by phone. “Also, as you are seeing more confidence coming into the Spanish market, the negative impact on IAG is starting to reverse.”
IAG rose 7.1 percent in the last two days, the biggest two-day advance since July. The stock closed up 2.1 percent at 223 pence today. More than 8.9 million shares traded, about 67 percent more than the three-month daily average.
In a bid to improve Iberia’s financial performance, IAG has said it wants to eliminate 4,500 jobs, curtail its fleet and shutter unprofitable routes. Shares in the London-based company have gained more than 30 percent since management unveiled the restructuring plan in November.
“Even if they can achieve just two-thirds of what they want this year, this will be a terrific turnaround in earnings,” said Byde, who lists IAG as a preferred stock. “Shares have a lot further to run,” he said, and could reach 300 pence.
IAG also rose today as David Pitura, an analyst at JPMorgan, raised his recommendation to overweight from neutral. The stock “will outperform once Iberia reaches agreement with unions,” he said, or if cuts are made unilaterally.
IAG’s traffic increased 2.6 percent last year, driven by British Airways. Passenger traffic, or the number of travelers carried multiplied by the distance flown, slumped 3.1 percent at Iberia, the company said on Jan. 7. IAG pared capacity at Iberia by 3.3 percent last year on weaker demand, while adding 5.4 percent more seats at British Airways.