IAG share price tumbles as analysts flag North American performance concerns

Shares in International Consolidated Airlines Group (LON:IAG) have fallen deep into the red in today’s session after analysts at Bank of America Merrill Lynch turned bearish on the British Airways parent, flagging concerns over its North American performance. The downbeat comments come after the company, which also owns Aer Lingus and Spanish carriers Iberia and Vueling, recently said that it was launching a new low-cost transatlantic airline.

As of 14:31 GMT, IAG’s share price had lost 2.91 percent to 533.50p, underperforming the benchmark FTSE 100 index which currently stands 0.99 percent lower at 7,264.50 points. The group’s shares have lost more than one percent of their value over the past year, but are up by 21 percent in the year-to-date.
BofA Merrill Lynch trimmed its stance on IAG from ‘buy’ to ‘underperform’ and slashed its price target on the shares from 550p to 500p. Sharecast quoted the analysts as saying that they expect that the group’s North Atlantic performance – a key contributor – will splutter in the second quarter and second half of this year with a number of factors putting pressure on sentiment and fundamentals.

The broker further said there was evidence to suggest that broader corporate travel spend, in particular financial services, will see pressure through the course of the year. As far as leisure travel is concerned, BofA Merrill Lynch points to new market entrants, in particular Norwegian Air Shuttle, which despite a “likely flawed and certainly leveraged business model”, will possibly cause deflation.
The comments come after IAG recently said that it was launching a new long-haul budget airline based in Barcelona. The new carrier, called Level, is expected to compete with Norwegian Air Shuttle and Wow Air which offer discount tickets for transatlantic routes.
As of 15:00 BST, Monday, 27 March, International Consolidated Airlines Grp share price is 534.83p.