The IAG share price retreated today, May 8, and then pared back some of those losses after the company published its results, which provided more color on how the ongoing war has affected its business. It retreated to 372p and then rebounded to 390p.
IAG flags Iran war risks
International Consolidated Airlines Group, the parent company of top airlines like British Airways, Iberia, LEVEL, and Aer Lingus, has pulled back from the year-to-date high as investors assessed the impact of the ongoing Iranian crisis.
This crisis has led to higher jet oil prices, including some shortages, in key areas like Europe and Asia. They have more than doubled, a move that has mostly affected unhedged airlines.
IAG has been less affected by the crisis as it spends millions of dollars each year to hedge these risks. It is well-hedged for the rest of the year at 70% and the management expects to recover around 60% of this through revenue and cost management.
At the same time, it runs a highly diversified business model, with most of its revenue coming from the transatlantic routes.
The company published strong numbers today, even as it warned about margins. Its revenue jumped by 1.9% YoY to 7.18 billion euros in the first quarter, while its operating profit jumped by 77%. This growth was largely because of its revenue growth and offset by the relatively higher energy prices.
British Airways made over 3.38 billion pounds, making it the biggest part of its business. It was followed by Iberia, which made 1.8 billion euros. Aer Lingus made 420 million euros.
Additionally, its loyalty business, which is a capital-light segment, grew by 10% as its profit margin jumped to 20.1%. Its revenue jumped to 579 million pounds.This business enables customers to collect rewards such as upgrades and car rentals. It has become an important part of most airlines, with analysts seeing them as banks. IAG made a net profit of 301 million euros, while its total liquidity jumped to over 12.7 billion.
The main risk that IAG stock faces is a prolonged war that pushes jet fuel prices much higher. While Trump has signaled that he wants the war to end, Iran and Israel have other ideas. It is also highly unlikely that Trump will get a better deal. For one, any deal will require the US to end its sanctions and release Iranian funds, a move that Israel will blast.
Therefore, there is still a risk that the war will last longer, which will hurt the ongoing recovery. On the positive side, the war may end soon, leading to lower prices and recovery in Middle East travel.
IAG share price technical analysis
IAG stock chart | Source: TradingView
The daily chart shows that the IAG stock price has crawled back in the past few days. It has jumped from the war low of 335p to the current 390p. A closer look shows that it has formed a down-gap and moved above the 50-day and 100-day moving averages.
Therefore, despite the rising risks, there is a likelihood that the stock will keep rising as bulls target the key resistance level at 413p. A move above that price will point to more gains, potentially to the resistance level at 450p.
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