International Consolidated Airlines Group SA (LSE:IAG) has made it through the early turbulence of 2025 with its full-year trajectory intact and a clearer runway ahead.
The owner of British Airways, Iberia and Aer Lingus delivered a much stronger-than-expected first quarter, prompting a string of forecast upgrades and a sense that the airline is weathering macroeconomic crosswinds better than most.
Panmure Liberum has raised its operating profit forecast for the year by 5% and increased its target price from 500p to 540p, citing both a favourable shift in fuel costs and margin resilience across the group.
Nudging down
While revenue assumptions have been nudged slightly lower to reflect a more cautious stance on ticket pricing, the cost side of the equation is now looking significantly better.
Deutsche Bank described the first-quarter performance as “high quality,” noting underlying earnings (EBIT) came in at €198 million, 49% ahead of consensus estimates, despite a €50 million hit from a power outage at Heathrow and a later Easter.
Passenger revenue per available seat kilometre, or PRASK, rose 3.2%, led by a 13% increase on transatlantic routes. Net income reached €162 million, far surpassing Deutsche’s €14 million forecast, helped by a €134 million foreign exchange gain.
Panmure highlights that IAG is 80% booked for the current quarter, slightly ahead of last year.
Bookings in line
While second-half bookings are in line with prior trends, aircraft delivery delays across the industry are expected to cap new capacity, which could support pricing. Even with some softness in US economy-class demand, the broker believes the balance of risk remains tilted to the upside.
IAG’s fuel bill assumptions also look conservative. The group is budgeting for unhedged jet fuel at $730 per tonne, while spot prices are nearer $650. Panmure calculates this could deliver a €600 million benefit to earnings if fuel costs remain at current levels.
The valuation still appears compelling. IAG trades on just 5.4 times forecast earnings and 3.2 times enterprise value to EBITDAR for 2025.
Panmure estimates that the company could return up to 71% of its current market capitalisation through share buybacks by 2027 if leverage stays within its target range.
Flying higher
Having proven it can post a profit in aviation’s toughest quarter, IAG now looks set for a strong summer. Both banks see further upside, with Deutsche Bank holding a 370p target and Panmure lifting its view to 540p. For now, the skies look clear.
In early afternoon trading, the stock was up 2.25% at 318.7p.