British Airways owner International Consolidated Airlines Group SA (LSE:IAG) is set to enjoy tailwinds this year that the market is not yet giving it full credit for, analysts said as they reflected on Friday's blowout results.
Shares in IAG were down 2.8% to €4.15 in Madrid and 343p in London on Monday, in what looked like profit-taking from the gains made last week, but JPMorgan hiked its December 2026 share price target to €6 (495p) as it hailed a strong revenue outlook for 2025 and the news of the €1 billion share buyback.
JPMorgan highlighted that supply-demand dynamics are favourable for IAG, for transatlantic routes in particular, "and the market may continue to underappreciate IAG’s pricing power/revenue tailwinds this year".
Analysts at RBC Capital also like the look of market dynamics for IAG.
Scheduled intra-European capacity is set to be up 4% year-on-year in the second quarter, moderating to 3% in the third, while capacity and short-haul in particular "looks relatively constrained" to and from the UK and France, and on routes between Europe and both North and South America.
"We think the capacity backdrop continues to look favourable for most IAG airlines into the summer," RBC said.
Analysts at Panmure Liberum said last week's results "provided further evidence of IAG’s ability to deliver profit margins and returns on capital that are completely out of line with adverse industry stereotypes".
The current share price valuation "fails to reflect IAG’s highly attractive financial performance, which is not just sustainable but has further upside potential", Panmure said, keeping its 'buy' rating but reducing a target price to 500p from 570p as a result of a higher tax rate assumption.
Jefferies called IAG "a multi-year re-rating story, as the BA turnaround and delivery of the Next Generation fleet offer scope for further consensus margin upside and re-rating potential as the company approaches best-in-class margin, ROIC and FCF generation". The broker raised its target price to 400p.
JPMorgan also said that while free cash flow is expected lower in 2025 due to higher capital expenditure and one-off VAT payments, it should still be "significant" and enable an additional €500 million share buyback this year if IAG chooses.
"Investors tend to generally shy away from airlines in times of macro uncertainty. However, IAG’s business model, exposure to premium, and some ‘partly idiosyncratic’ profit drivers continue to be an attractive set-up", was the US investment bank's conclusion.