International Airlines Group Finally Returns to Profitability; Shares Look Cheap, but Speculative

International Airlines Group, the owner of British Airways, reported its first quarter of profitability since the start of the coronavirus pandemic. The EUR 293 million EBIT was underpinned by a return to profitability at British Airways, the group’s largest revenue contributor. All businesses were profitable at an operational level with the strongest overall performance from Iberia. British Airways continues to face disruptions caused by staff shortages at its U.K. airports. Capacity expectations for the full year have been reduced to 78% of 2019 levels, from 80% previously, largely due to scaling back of schedules to manage airport disruptions at British Airways. Profitability is expected to significantly increase in the third quarter and be positive for the full year. We make no changes to our fair value estimate of GBX 270. Shares appear attractive, but we caution investors about our Morningstar Uncertainty Rating of Very High for the firm due to high levels of indebtedness.