Important synergies and collective strength: these were some of the reasons that analysts trusted in International Consolidated Airlines (IAG) when it merged with British Airways and had its IPO nearly five months ago. Since then many things have happened, not all of them good. The company has struggled against several factors because it has had to deal with high petroleum costs during Arab revolts, among other things.
But still, the airline has been able to maintain solid fundamentals. And it is despite these difficulties that experts are recommending that people buy shares of IAG and trust that it will sort out its difficulties and cyclical character, multiplying its 2010 profits by almost five times this year (500 million euros) and seven times in 2013 (775 million). This strengthening would put the airline on the last strategic revision of Eco10 (a market index created by elEconomista and audited by Stoxx). Two companies were removed from the index and BBVA and IAG were added.
A heavy beating
"Since the merger, the airline has suffered from excessive punishment in the stock market, but the synergies between these two airlines (Iberia and British Airways) have still not panned out," argued Rafael Collada, the management representative from M&G Valores, one of the analysis companies that carried out Eco10 and decided to add IAG to their investment proposals. Support for the airline from June to August was also high given the view that their value might leverage the "perspectives about this season´s global tourism," as IG Markets note.
Europe?s tourism industry is starting the summer with a 9% drop from last year, and the airline has only been able to close in the black twice during the past four months. Still, at the margin of its market losses, IAG will continue investing in strengthening its business outside of Europe, a strategy that could begin to bear fruit in the short term.
Translated and Edited in English by Brandon Dyches and Jose L. De Haro (Joseluisdeharo@eleconomista.es)
