LONDON, UK – The International Consolidated Airline Group (IAG) shares are expected to dip this morning, a lot more than what was expected.
The company decreased its original forecast for their share earnings not just for 2020, but including two years after next year as well. The shares in IAG includes that of Iberia, Vueling, Aer Lingus, and British Airways among its brands. According to the company’s newest forecast, the group isn’t likely to expand as much as they thought earlier. From the 12% expected growth they were expecting, it’s now down to 10%.
The previous forecast from IAG also stated an expected 6% more in the group’s seat-kilometers from 2019 to 2023. Unfortunately, the recent forecast only expects about 3.4% growth for IAG.
But, the figures exclude the Spanish-based airline, Air Europa’s contribution of about $1.1 billion (1 billion euros) early this week. Although the group is underperforming, the share price is only down by 1.5%, only a slight dip, which indicates that investors aren’t panicking at the moment.
With the US-China trade war, European growth was significantly affected. It left airline companies to offer discounts to fill the planes, which they ordered before the trade war started. Because of this issue, airline investors have long been wanting to have fewer seats they have to fill.
Significantly, IAG hasn’t made any changes to its 12% to 15% operating margins and its (155) target of return for investment capital. Also, the rest of the airline sector hasn’t reacted badly about the news, despite the massive warnings early this year. Just in recent weeks, the issues about overcapacity has died down after French-based Aigle Azur, and Thomas Cook went into a settlement. Carsten Spohr, CEO of Lufthansa, also actively damped down the rumor that he wanted Alitalia propped up, which still has a lot of staff and planes to continue being profitable.
On the other hand, Ryanair informed last week that the Boeing 737 MAX isn’t expected to be operating at its full capacity until next year. It stated the holdup in their regulatory approval as the cause of the delay in their flights.
Elsewhere, the same downbeat but still largely positive is the streak with Germany’s DAX down by 0.2% with 2.3% weekly gain, Euro Stoxx 600 down by 0.2% at the 405.36 but with a weekly 1.5% gain. FTSE MIB and Dutch AEX were also up by 2.1% and 2.7% for the week, respectively.