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IAG share price: Gallego would ‘participate in’ future consolidation

IAG Share Price

The IAG share price (LON:IAG) held pretty steady over the past three months, amid uncertainty over the UK’s travel restrictions. However, in the last two days it dropped by nearly 13p a share to 196.52p. The move came as news emerged that Portugal, one of Europe’s major holiday destinations, was being removed from the green list. Since the beginning of the year the IAG share price is up by 23.2%. While many were expecting more countries to turn green than to go the other way, now is an ideal time to reassess the IAG share price to see what the future may hold.

Consolidation

The British Airway owner revealed in May that its passenger capacity during the first quarter was at around 20% of the level in 2019, before the pandemic. This does not bode well for the company which already made a loss before tax of £1.6bn this year. IAG may need to seek alternate strategies to combat rising costs.

The IAG chief executive Luis Gallego believes the company should look to merge assets. According to Gallego, there may be only two or three airlines per continent in the coming years. Additionally, while passenger numbers are expected to eventually return to normal, business travel is unlikely to fully recover. A significant portion of IAG’s revenue comes from this sector.

In Gallego’s view this could lead to further consolidation, which the IAG would “participate in”. Gallego’s willingness to act in this way could serve to secure the IAG share price in the future.

Portugal off Green List

Shares in major travel companies plummeted yesterday as the UK government removed Portugal from its green list of safe destinations. The government’s decision to change Portugal’s status to amber means those traveling will have to do a ten-day home quarantine on their return.

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The news caused shares in the entire airline industry to plummet, and created uncertainty over the future.

Chief executive of the Business Travel Association, Clive Wratten, told The Times that the government’s ruling effectively meant the UK had essentially closed its border. “It is a devastating day for the travel industry as a whole. Removing Portugal from the green list will destroy any confidence in international travel, whether for work or leisure.”

The possibility of travelling to Portugal throughout the summer gave hope to the IAG share price and travellers alike in an otherwise dreary summer season. The traffic light system was first put into place on May 17 when international leisure travel resumed. Now that Portugal is being removed from the green list, only 11 countries will remain. There is no clarity over when major holiday destinations will be added to the green list.

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