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International Airlines Group (IAG) Fundamentals


International Consolidated Airlines Group, S.A., also known as International Airlines Group, is the name of an Anglo-Spanish holding company formed on 8 April 2010 as a result of the proposed merger between British Airways and Iberia.


The new company will be the third largest airline holding company in the world by revenue,with 419 aircraft transporting passengers between 200 destinations.The new company will carry over 62 million passengers per year, according to British Airways executives.Both airlines will, however, continue to operate under their current brand names. British Airways shareholders will take a 55% stake in the new company, while Iberia shareholders will own the remaining 45% stake.

I thought aircraft were leased so how can you use them as collateral?
Obviously you can, but seems to be a book keeping trick!

Merrill Lynch comment today:
"Post the sale of Bankia’s stake, we feel that one of the overhangs on IAG’s shares has been cleared and that investors can refocus more on the improving fundamentals. We are reiterating our Buy on IAG with a 310p price objective. We believe the best time to build a position in any airline is when:
 There are capacity reductions, which provides sustenance for consensus upgrades.
 The bears have a short-term red herring over which to be concerned.
 A valuation is discounting value destruction, with an uptick in CROCE.
IAG qualifies strongly under all three banners
 At IAG group-wide capacity will likely be down c.1.5% this year. Consensus upgrades are being driven by strong revenue momentum across the North Atlantic (we estimate RASK has been at c.+10% YoY in H1’13). Our group-wide FY13E EBIT forecast of €833mn is c.€200mn above consensus, driven by a c.100bp differential on yields (vs. consensus; BofAMLe +5% YoY).
 In terms of red herrings, we regard the Iberia issues as a distraction, with little value being given to the Iberia asset in the share price.
 We estimate an FY13 EV/CE multiple of 0.40x, with the business covering its cost of capital in FY15. Our 310p PO is based on an EV/CE multiple of 0.45x, which is similar to where BA traded in 2007."

Jefferies International Buy 0.00 - 320.00 Initiates/Starts

Deutsche Bank Buy 0.00 330.00 330.00 Reiterates

Morgan Stanley Overweight 0.00 - - Reiterates

RBC Capital Markets Outperform 0.00 - 330.00 Reiterates

2 year+ high @290.00p

Half Yearly report


SIX MONTHS RESULTS ANNOUNCEMENT

International Consolidated Airlines Group (IAG) today (August 2, 2013) presented Group consolidated results for the six months to June 30, 2013.

IAG period highlights on results:

· Second quarter operating profit €245 million (2012: loss €4 million) before exceptional items, based on strong passenger unit revenues and non-fuel unit cost improvements
· Before Vueling at constant currency, second quarter passenger unit revenue up 4.8 per cent and non-fuel unit costs down 0.2 per cent
· Operating loss for the half year €33 million (2012: loss €253 million) before exceptional items
· Revenue for the half year up 2.1 per cent to €8,707 million including 1.7 per cent adverse currency impact
· Passenger unit revenue for the half year up 2.8 per cent (4.6 per cent at constant currency), on capacity increase of 1.2 per cent
· Fuel costs for the half year down 3.7 per cent to €2,864 million (2012: €2,973 million). Fuel unit costs down 4.7 per cent at constant currency
· Non-fuel costs before exceptional items for the half year up 1.1 per cent at €5,876 million. Non-fuel unit costs down 0.2 per cent, up 0.9 per cent at constant currency
· Cash €3,627 million at June 30, 2013, up €718 million including €549 million of Vueling cash
· Adjusted gearing up 3 points to 54 per cent including Vueling

Plenty of green!

Deutsche Bank Buy 0.00 317.00 330.00 360.00 Reiterates

HSBC Overweight 318.55 317.00 350.00 375.00 Reiterates

Credit Suisse Outperform 318.55 317.00 345.00 345.00 Reiterates

Citigroup Buy 326.70 326.70 300.00 380.00 Upgrades

Traffic Statistics July 2013M

JULY 2013 - IAG GROUP TRAFFIC AND CAPACITY STATISTICS


∙ In July 2013, Group traffic measured in Revenue Passenger Kilometres increased by 6.6 per cent versus July 2012 (down 2.8 per cent on a pro-forma basis); Group capacity measured in Available Seat Kilometres rose by 8.5 per cent (down 1.7 per cent on a pro-forma basis).

∙ Group premium traffic for the month of July increased by 0.4 per cent compared to the previous year, on falling capacity.

∙ Traffic in long haul is still influenced by the Group policy to improve unit revenues through yield, rather than load, as well as by the timing of Ramadan.

∙ Underlying market conditions remain unchanged from those described at the publication of Quarter Two results on 2 August.


6 August 2013

HSBC Overweight 0.00 323.40 375.00 375.00 Reiterates

Jefferies International Buy 323.40 323.40 - 355.00 Reiterates

Deutsche Bank Buy 320.60 320.60 360.00 360.00 Reiterates

Nomura Buy 320.60 320.60 283.00 335.00 Retains

Shorthaul fleet order

International Airlines Group (IAG) has secured firm orders and options for up to 220 Airbus A320 family shorthaul aircraft - up to 120 of these for its subsidiary Vueling. The new aircraft will enable the Barcelona-based airline to replace some of its existing A320 fleet and expand its business.

The Vueling agreement comprises 62 firm orders - 30 A320ceo and 32 A320neo - plus 58 options. The firm orders will be delivered to Vueling between 2015 and 2020.

In addition, IAG has secured 100 A320neo options which could be used for any of the airlines in the Group - British Airways, Iberia or Vueling - for aircraft replacement requirements.

Talk of a bid for Flyb.

Investec Hold 304.60 315.80 270.00 320.00 Downgrade

Cantor Fitzgerald Buy 303.10 299.40 290.00 360.00 Reiterates

Deutsche Bank Buy 302.55 360.00 360.00 Reiterates

Bank of America Merrill Lynch Buy 301.10 301.20 - 360.00 Reiterates