IAG was flying high at the top of the FTSE 10 on Friday after the airline announced its first dividend since before the pandemic and abandoned its pursuit of rival Air Europa.
Shareholders will be delighted that IAG’s progress has cleared the way for the airline to pay a dividend after revenue and operating profit grew in the first half of the year.
IAG shares were 6% higher at the time of writing.
“British Airways owner IAG has maintained a steady flight path in 2024 with the international carrier faring considerably better than its national counterparts. Long haul travel has held up well with robust demand for air travel fuelling increased free cash flow, boosting shareholder returns as a result,” said Mark Crouch, Market Analyst at eToro
“While profits were down a touch from last year, the company’s balance sheet is in a far healthier state. Investors would need to go back to before the pandemic for the last time IAG paid a dividend, so today’s announcement of an interim dividend is a strong statement that the business has at last broken free of the pandemic fallout.”
Although investors were clearly encouraged by the reinstatement of the dividend, they will also be reassured by IAG’s prudent approach to capital allocation with the calling of the takeover of Air Europa.
“Walking away from a proposed takeover of Air Europa also shows the company has discipline and isn’t prepared to spend a long time fighting antitrust regulators to get the deal over the line. Management has clearly decided its time is better spent elsewhere and to just move on. Investors often like companies that take decisive action,” said AJ Bell’s Russ Mould.
“While the likes of Jet2 and EasyJet are heavily dependent on people flying off for their summer holidays, International Consolidated Airlines has a much wider range of customers as it has a mixture of short and long-haul destinations. That broadens its opportunities to make money.”