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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  International Consolidated Airlines Group, SA    IAG   ES0177542018

INTERNATIONAL CONSOLIDATED AIRLINES GROU

(IAG)
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International Consolidated Airlines : BA owner IAG trims capacity growth forecast to shield margins

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11/08/2019 | 09:02am EST
Willie Walsh, CEO of International Airlines Group speaks during the closing press briefing at the 2016 International Air Transport Association (IATA) Annual General Meeting (AGM) and World Air Transport Summit in Dublin

British Airways owner IAG scaled back its three-year capacity growth forecast on Friday, hitting its earnings per share outlook but protecting its margins in the face of a weak global economy and a highly competitive marketplace.

"We're well-prepared for anything that comes at us. We've seen a softening economic environment, and therefore we're adjusting our growth plans," IAG Chief Executive Willie Walsh told analysts during a capital markets briefing.

The airline industry has struggled to maintain margins in the face of industry overcapacity and a muted economic outlook, which has produced fierce competition over ticket prices.

Germany's Lufthansa has said slower capacity growth at rivals was providing relief, with Ryanair set to grow at its slowest rate in seven years in the year to March 31, 2021.

"We still see growth ... but we're moderating our growth. Even in that environment ... we will be generating very significant amounts of cash to be able to ensure that our shareholders get rewarded for their faith," Walsh added.

Although Walsh was presenting mid-term targets, he is likely to leave before the end of the period as the long-serving CEO confirmed he plans to retire by October 2021.

"I still love what I do, but my intention is to be retired within the next two years," Walsh said.

IAG, which has cut its outlook for capacity growth in 2019 as the year has progressed, estimated available seat kilometres will grow by 3.4% a year between 2020 and 2022. It had previously forecast 6% annual growth for 2019-2023.

TOO MUCH CAPACITY

The owner of Iberia, Aer Lingus and Vueling, said the capacity growth cut would lower its forecast for earnings per share (EPS) growth to 10%+ a year from 12%+ a year.

However, it reiterated its targets for operating profit margins of 12-15% and return on invested capital, and shares recovered from a steep early fall to trade just 0.2% lower.

Chief Financial Officer Steve Gunning said IAG had probably had too much capacity in the market in first quarter, adding that there would be no growth at Vueling next year.

IAG has also taken a hit from pilot strikes at British Airways, which has knocked its profit outlook, but it said the forecasts for capacity growth were not adjusted for these.

Although the dispute over pay remains unresolved, there is no further industrial action scheduled and British Airways CEO Alex Cruz said that people could look forward to Christmas.

IAG's strategy update comes after it said on Monday it would buy Spain's Air Europa to boost its presence on routes to Latin America and the Caribbean.

IAG said it expected the deal, which will be funded through external debt, to close in the second half of 2020 and for it to add to its earnings in the first full year after closure.

By Alistair Smout

Stocks mentioned in the article
ChangeLast1st jan.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, SA 2.80% 557.4 Delayed Quote.-9.81%
LUFTHANSA GROUP AG 1.06% 17.695 Delayed Quote.-10.18%
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Financials (EUR)
Sales 2019 25 631 M
EBIT 2019 3 239 M
Net income 2019 2 196 M
Debt 2019 7 225 M
Yield 2019 4,52%
P/E ratio 2019 6,12x
P/E ratio 2020 5,65x
EV / Sales2019 0,79x
EV / Sales2020 0,74x
Capitalization 12 909 M
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Technical analysis trends INTERNATIONAL CONSOLIDATED
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Income Statement Evolution
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Mean consensus BUY
Number of Analysts 17
Average target price 7,88  €
Last Close Price 6,51  €
Spread / Highest target 78,2%
Spread / Average Target 21,2%
Spread / Lowest Target -9,15%
EPS Revisions
Managers
NameTitle
William Matthew Walsh Chief Executive Officer & Director
Antonio Vázquez Romero Chairman
Stephen William Lawrence Gunning Chief Financial Officer & Executive Director
Kieran C. Poynter Independent Non-Executive Director
Alberto Miguel Terol Estabean Senior Independent Director
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