IAG share price analysis after the latest IATA profits forecasts
- IAG stock price has pulled back by over 8% from its highest point this year.
- American Airlines, its partner, slashed its forward guidance in May.
- IATA expects that airlines will generate a net profit of over $30 billion this year.
International Airlines Group (LON: IAG) share price has plunged by over 8% from its highest point this year as investors start taking profits. The 8% decline happened after the company published encouraging financial results on May 10th.
Airline profits to surge
Copy link to sectionIAG, the parent company of British Airways and Iberia, reported strong financial results in May, signalling that its turnaround was still continuing.
Its total revenue rose from €5.8 billion in Q1’23 to over €6.4 billion in the first quarter of this year. It also narrowed its net loss from €97 million to €4 million while its cash and cash equivalents jumped to over €8.7 billion.
Most of its revenue growth came from the North Atlantic route followed by Europe and Latin America. The company also noted that its summer bookings were strong. However, it expressed concerns that non-fuel costs will continue rising because of the rising employee wages.
IAG could benefit from the rising profits in the airlines business. In a report, IATA noted that global airlines will make a net profit of over $30 billion this year, a big increase from the $27.4 billion they made in 2023. It was also higher than the previous estimate of $25.7 billion.
Still, like IAG, IATA warned that the average earning per passenger will be $6.14 because of the rising expenses. Jet fuel prices have remained steady in the past few months. The company is also facing other challenges such as the lack of sustainable aviation fuel and manufacturing bottleneck from Airbus and Boeing.
The other challenge facing IAG is that American Airlines slashed its forecasts for the year. This is a notable development since the two companies have a transatlantic partnership. As such, there are signs that the company’s business could slowdown soon.
IAG share price forecast
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The daily chart shows that the IAG stock price peaked at 187.60p on May 14th and then tumbled to 172p. It has dropped below the support level at 173.55p, its highest swing in February 2023.
The stock has also crashed below the 50-day and 25-day Exponential Moving Averages (EMA). Also, the two lines of the MACD indicator have formed a bearish crossover. The Relative Strength Index (RSI) has moved below the neutral point.
Therefore, the stock will likely remain under pressure for a while and then rebound to the year-to-date high of 187.60p.
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