International Consolidated Airlines Group SA (LSE:IAG) shares have taken a hit recently, dropping around 25% from their highs, as investors worry about a slowdown in US demand. But JPMorgan thinks the sell-off is overdone.
The big concern has been warnings from US airlines about weaker domestic demand in early 2025.
Since IAG, owner of British Airways and Iberia, makes a huge chunk of its profits from transatlantic flights, the market is spooked. But JPM says there’s no sign yet of falling demand for flights between the UK and the US.
The slowdown seems to be mostly in lower-end domestic travel within the US, which could be down to government travel cuts, bad weather, and aviation disruptions.
JPM believes that wealthier American travellers heading to Europe aren’t likely to be affected in the same way. The real risk is later bookings from business travellers, but it’s too soon to tell if that will become an issue.
The bank also sees other positives. It reckons British Airways could hit a 15% profit margin before 2027, IAG’s share buyback could continue for years, and fuel costs are coming down.
While the market wants more clarity on summer bookings, JPM maintains its ‘overweight’ rating and a €6 price target, seeing potential upside ahead.
The stock was up 2% at €3.358.