Fresh research from International Consolidated Airlines Group suggests the investment case remains compelling, even if recent conversations with management offered little in the way of new headlines.
In a note following investor meetings at its UK Focus Conference, RBC Capital Markets described management’s messaging as firmly “in line”.
However, the broker said the discussions reinforced the core attractions of the stock, including continued earnings strength and scope for further cash returns.
RBC said IAG remains comfortable with consensus expectations for close to €5 billion of adjusted operating profit, with margins sitting at the top end of its medium-term 12–15% target range.
That performance is holding up despite geopolitical uncertainty and uneven demand trends across markets.
The mix of demand continues to matter. Premium travel remains strong, while economy bookings, particularly from the US, are softer. British Airways is relatively well positioned in this environment due to its higher exposure to premium long-haul traffic, helping to stabilise group earnings.
Costs are also moving favourably. Non-fuel unit cost inflation is expected to ease into next year, while fuel prices are acting as a tailwind. RBC notes that industry-wide capacity constraints could allow airlines to retain more of that benefit, rather than passing it straight through to customers.
Capital allocation remains front and centre. IAG’s balance sheet is running below its target leverage range, and management appears relaxed about that position. RBC said expectations for the next share buyback sit around €1.2 billion to €1.5 billion, even as capital spending rises later in the decade.
Strategically, interest in TAP Air Portugal was confirmed, but RBC sees limited chances of a deal without a route to control. Organic growth, particularly in Brazil, looks the more likely path.