IAG shares hit a patch of turbulence on Friday after the airline operator released full year results for 2022 which confirmed robust revenue recovery from the pandemic.
Revenue for 2022 was €23bn, up from €8bn in 2021, as pent up demand from the pandemic was unleashed on the travel sector.
After recording a near €3bn operating loss in 2021, the British Airways owner swung to a €1.2bn operating profit.
“British Airways owner, IAG has swung to an operating profit of €1.2bn, compared to billions in losses last year. The impressive regaining of altitude comes as a direct result of Covid restrictions easing and a return to more normal travel,” said
“As a long-haul specialist, IAG has been one of the last names in the sector to gain momentum following the pandemic. Of course, aviation has flown straight into another hurdle in the form of a cost-of-living crisis. So far it seems pent up demand for travel is keeping things propped up, but there is a limit to how long this can continue. It’s heartening to see IAG’s capacity ramping back up to pre-pandemic levels – getting to this point didn’t come without its well-publicised challenges.”
Despite the return to profit, IAG shares were 4% lower at the time of writing on Friday. Analysts at AJ Bell highlighted IAG’s €10.3bn net debt as a potential source of strive for investors.
“As a legacy of Covid, debt is highly elevated. This could make the market uncomfortable, particularly if there is any indication it is preventing IAG from making necessary investments in its business,” said Russ Mould, investment director at AJ Bell.
IAG also announced the €400m acquisition of the remaining 80% of Air Europa on Friday. Although €100m of the consideration will be paid in shares, investors may be a little perturbed IAG are spending cash on acquisitions, rather than paying down debt.