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That's quite a simplistic view of what we saw this year of a back-log of people wanting to travel before rates and inflation started to hit income and we didn't even reach pre pandemic levels in each quarter. On top of that business travel still lagging which in a lot of cases absorbs costs and allows them to sell the cheaper economy tickets to average folk.
A lot of different scenarios could play out and there is a wider picture to look at of what's supressing this share.
Mr Gallego, director of British Airways parent company IAG, told reporters at a roundtable discussion that there was a more than 90% risk that the industry would not comply with the EU demand European Union for the availability of sustainable aviation fuel (SAF) in 2025.
The European Union has adopted rules requiring flights departing from EU airports to carry a gradually increasing amount of SAF, starting with 2% of total fuel in 2025.
Gallego said Europe's tougher rules, compared with those in other regions, risked making its industry less competitive, putting pressure on airlines to continue their recent wave of partnerships. .
“ The problem we have in Europe is that we have a small group or a small airline fighting a global war with sustainability mandates that are ahead of the others. We will not be competitive ,” Mr. Gallego said.
“ We therefore need to consolidate the sector, in order to be able to afford all the ambitions that we have, for example, in terms of sustainable development. This is why we are trying to be bigger, more efficient and develop better platforms for our customers . »
Ryanair chief executive Michael O'Leary predicted further consolidation, with IAG best placed to buy Portuguese carrier TAP, ahead of rivals Air France-KLM and Lufthansa.
He also reiterated his predictions that low-cost rivals Wizz Air and easyJet would fall into consolidation, with easyJet being bought by IAG or Air France-KLM, or both, and Wizz Air being bought by Lufthansa or a Middle Eastern acquirer.
Why invest in a debt ridden airline which was a gone concern until it was able to raise a huge amount of debt to survive? When AI stocks have returned 100%+ investors? When the time comes people will invest here, but I don’t think that time is as quick as you think.
Sorry, you’re right it is illogical and nobody can explain why. Why doesn’t the smart money see that?
What happens when govt prints loads of money? Price get inflated people have more money.
How do you lower inflated prices? They increase rates to take money out of the economy.
The impact of this is that the people get poorer and prices decrease.
Now say you own an airline company. Your cost have increased and your profit margins have decreased. Initially you were able to charge the increases to your customers whom due to not being able to go on holiday meant you had a backlog of customers willing to pay higher fares. Now your main costs fuel (which due to external pressures of war and cutting production to increase prices) and wages of staff striking to increase their pay have increased. Consumer demand is predicted to decrease as people have less money to spend. You’ve now got to find a balance of what people are willing to pay and being profitable.
Now this is the logical thinking of investors, as the next year or so is uncertain with a lot of hedge funds predicting pain to come for airlines.
Good results now put us in a better standing but certainly not a metric for the forward direction of the company.
I am not denying value to be had I just don’t think recovery is as quick as you think it will be.
Not illogical IMO. Short term income is predictable and known. The concerns to name a few are looking ahead of the current quarters. Wage increase, fuel increase, recession looming, high debt, rates and consumer demand for the next couple of years. Also from a technical perspective points downwards. This is an airline after a pandemic and hugely inflated economy. (simplified higher costs which will prove more difficult to pass onto customers)
If you're looking to make some big bucks short term an airline is not your best bet. AI/Tech/War stocks are probably where you want to be looking. Not debt ridden airlines, this is got a couple of years before it will turn around decent value for investors IMO.
Short term income is easy to predict for airlines, EasyJet fell below market estimates. Among the wider factors affecting price of airlines. Peter Schiff explains quite well in a podcast with Joe Rogan back in 2020 why airlines will continue to struggle for a while (from more of an economical perspective) and why your funds are best used elsewhere in the meantime.
I like the optimism but IAG still have pain before they can comfortably pay debt/pensions/dividends. But IMO balance sheet not healthy and neither are profit margins.
Analyst consensus for Q2 operating profit with most analyst leaning towards higher end.
£1,092m - high
£895m - med
£680m - low
Good results likely priced in/expected.
I think what all of MMs are concerned about (not referring to our largest stakeholders blackrock and vanguard as they just seem to have majority stakes in every FTSE/S&P stock) is is the sustainability going forward and the pace of recovery.
I am not denying there is value to be had from this share, I just don't think it will be as quick as many here previously anticipated or now forecast.
Govts also printed and spent a huge amount over COVID. Regardless if they increase taxes the people have to pay, atm through inflation. Now they've got to take this money out the economy. Keeping stock markets up as well. We are yet to feel the full effect of this on consumer spending over next couple of years. (I know you and your friends maybe booking holidays for next year but this isn't reflective of wider amount of people in less affluent areas of UK and don't have expendable money to invest)
IMO an S&P or tech fund will outperform this share before it's worth actually investing here. Atm from what I can tell people are just up and down with their emotions reacting to short terms movements with no real value being generated. Mixed in with some sunk cost holders who've been here too long they want to feel like they got something out of it when they eventually sell.
Sorry to be downer everyone but it's good to look from different perspectives.
If it's known it's likely priced in. You're competing with big money and big resources. If you're looking to make a quick buck an airline after a pandemic and operating during economic turmoil is probably not your best bet. (Some of the people who've been here since 20-21 who were all saying how summer 2022 will be when it takes off, then it became 2023 now we're looking at 24/25?
The prices have increased because so has fuel, wages, debt/finance costs, admin expenses and contributions per flight.
IAG will resume dividends when it's not financially irresponsible and wont cause the stock to crash. Couple years maybe?
(IATA) The global jet fuel average price was relatively unchanged from the previous week with most regions showing modest decline in prices except for the North American market.
(IATA)Europe's jet fuel prices were supported by the prospect of a diesel shortage resulting from a prolonged Russian ban on motor fuel exports which could cause East of Suez refiners to shift production to diesel at the expense of jet fuel.
(IATA)Jet fuel prices in the US were propped up by concerns over supply tightness as a result of heavy refinery maintenance and stronger diesel margins which could diminish jet fuel production.
Oil trending up last 6 months from $68 per barrel to $89 per barrel representing a 30% increase
Jet fuel also trending up last 6 months from $84 per barrel to $130 per barrel representing 54% exceeding that of oil.
A lot of printed money through QE needing to be taken out will put the pressure on demand for air travel further. (although its the rich people with govt contracts who have most of it, it's the average person who will suffer)
I think the stimulated economy provided some false hope to investors (some of which who have been here since 2020/21) thought that the airline would shrug off the effects of the pandemic.
Short term I think we could reach about 1.30 with slow growth over next couple of years to the £2 mark.
IMO - Alternative views welcome
Business travel is more than just meetings which can take place over the interwebs:
Client meetings and presentations
Sales and business development
Training and workshops
Site visits and inspections
Market research
Team collaboration
Networking
Contracts and projects in different countries
Supplier and vendor relationships
Merger and acquisition activity
Conferences and trade shows
Global expansion
Supplier audits and quality control
Employee training
Also when a lot of managers are given budgets to spend money that is not theirs, why not book an all expenses paid flight to Miami to network? Still a lot of old fashioned old boys in their suits who like to do things traditionally face to face.
I think the results were pretty neutral. Net debt down to 7.3bil but they only paid off 361mil this year so still hefty interest to pay still. the rest was down to increase in cash/equivs which is to be expected when you return to profitability and take a lot of your bookings well in advance.
Still unknowns about how the forward bookings will hold up and economic uncertainties holding us back, same as before the results.