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IAG vs EasyJet: Which is a better stock to buy?

By:
on Nov 16, 2022
Listen to this article
  • IAG and EasyJet are two of the biggest airline stocks in the FTSE 250 index.
  • The two stocks have staged a strong recovery in the past few weeks.
  • I explain why I think that EasyJet is a better buy than IAG.

IAG (LON: IAG) and EasyJet (LON: EZJ) share prices have bounced back modestly in the past few weeks. EasyJet’s stock has rallied by 38.46% from its lowest level this year. This rebound has brought the year-to-date losses to about 37%. IAG share price, on the other hand, has rallied by almost 50% from its lowest point this year, bringing the year-to-date losses to 14%.

IAG vs EasyJet

Leisure and business travel recovery

IAG and EasyJet are two of the biggest airline stocks in the FTSE 250. The former owns leading brands in the UK, Ireland, and Spain. Its top brands are British Airways, Aer Lingus, Iberia, Level, and Vueling. The combined company has a total market cap of over 7 billion. 

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IAG is focuses on business and leisure business. Its British Airways business is known for business travel since it plays an important role in transatlantic route. 

EasyJet, on the other hand, is a relatively small airline with a market cap of about 3 billion pounds. It is a low-cost airline group with about 308 aircraft. It mostly focuses on western European routes and is not commonly used for business travel.

EasyJet and IAG have had a strong performance this year as business and leisure travel has rebounded.

The most recent results shows that EasyJet and IAG businesses are on their paths to recovery. IAG’s revenue rose to 7.3 billion euros, which was about 0.9% higher than what it did in 2019. This performance was helped by better pricing since its capacity was lower than what it did in 2019. IAG has become profitable, as I wrote in this article.

EasyJet has also turned a profit. The most recent results showed that the company will make an operating profit of between 525 million pounds and 545 million pounds. Its load factor has also increased by 92%.

EasyJet vs IAG 

So, which is a better buy between IAG and EasyJet? IAG has a key catalyst that could push its shares higher. It does a lot of business from Europe to China. Now with China easing its restrictions, there is a likelihood that the company will rebound.

EasyJet share price also has a potential catalyst that could push it higher. There is a likelihood that the company will be acquired. In 2021, the firm rejected an unsolicited offer by Wizz Air. There are now rumours that IAG may be preparing a bid. If such happens, the stock will likely continue rising. 

Therefore, since the two stocks have a small correlation, I would go with EasyJet because of its acquisition chances.