Worldwide Consolidated Airways Group (LSE: IAG) shares have had a turbulent decade. The British Airways proprietor nearly went to the wall in the course of the pandemic as world fleets had been grounded, and it was solely saved by a mighty €2.74bn rights concern and piles of debt.
In September 2022, the share worth fell under £1. Buyers who boarded considering they had been bagging a discount wanted robust nerves, however inside two years, they’d greater than quadrupled their cash. With the shares at £4.30 immediately, a £10,000 funding on the lows would have swelled to roughly £43,000. That’s a 333% capital achieve. Momentum has cooled, however the inventory remains to be up 30% over 12 months.
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Flying FTSE 100 progress inventory
The valuation for IAG, because it’s generally referred to as, now not appears distressed. The worth-to-earnings ratio is round 9, effectively above the rock-bottom a number of of three or 4 firstly of the restoration, but nonetheless modest for a corporation with robust money flows.
As flying rebounded, the group repaired its steadiness sheet at tempo. In 2024, free money stream climbed to €3.56bn, up from €3.02bn in 2023. That helped minimize web debt by one other €1.73bn. Internet debt is down from a peak of round €13bn in 2020 to €7.5bn on the half-year stage in 2025 (30 June).
Dividends have returned, albeit with a modest trailing yield of about 1%. The group can also be shopping for again shares. Within the first half of 2025, it returned €1.5bn to shareholders by way of dividends and share buybacks.
Not all airways have soared. Finances provider easyJet, additionally within the FTSE 100, continues to search out circumstances more durable given its heavier publicity to price-sensitive European customers. Against this, IAG advantages from resilient premium transatlantic visitors, notably enterprise and high-end leisure travellers. Its different airways, together with Iberia and Vueling, have additionally been regular.
It’s full-year outcomes time
On Friday (27 February), the group publishes full-year outcomes. In 2024, working revenue jumped 27% to €4.44bn on revenues up 9% to €32.1bn. It really picked up velocity within the first half of 2025, with working revenue up 43.5% to €1.88bn. Revenues rose 8% to €15.9bn. Decrease gas prices and beneficial international change actions helped, though there have been hints of moderation within the second quarter.
A low-ish P/E doesn’t mechanically sign a discount as aviation stays an inherently dangerous enterprise. Pandemics, wars, volcanic ash clouds or placing air visitors controllers can all disrupt income at quick discover. The US financial system has been robust, supporting profitable North Atlantic routes, although uncertainty lingers.
I nonetheless suppose IAG shares are value contemplating, however solely with a long-term view. The explosive post-Covid rebound might be behind us and progress prone to normalise. Even so, with ongoing deleveraging, dividend development and buybacks, the rewards ought to proceed to land. Friday’s outcomes ought to inform us extra.
