Shares in International Consolidated Airlines Group SA (LSE:IAG), the owner of British Airways and Iberia, rose 6% to 408p after the company announced an offer to repurchase the entirety of its outstanding 2028 convertible bond, a move that would meaningfully reduce its diluted share count.
IAG has offered to buy back the full €825 million principal of its 1.125% convertible bond, due May 2028, at a repurchase price of €138,950 per €100,000 nominal, broadly in line with the current market price and subject to adjustments for share price movements and accrued interest.
The low coupon on the bond means the transaction is likely to result in a net increase in interest costs. Still, the key attraction for equity investors is the reduction in the fully diluted share count by approximately 250 million shares, equivalent to around 5.6% of the current basic share count.
The buyback is conditional on bondholders tendering their holdings.
The move follows first-quarter results on Friday that drew a broadly positive response from analysts, with strong pricing across transatlantic and Latin American routes cited as the standout driver.
JP Morgan, which retains an overweight rating and has IAG on its Analyst Focus List, cut its 2026 EBIT estimate by 6% to €4.5 billion, primarily reflecting higher fuel costs and modestly lower capacity assumptions, and trimmed its December 2027 price target by 4% to €5.75.
Despite the reductions, the bank said it expects robust earnings and free cash flow generation this year, and suggested IAG's own guidance of around 60% fuel cost pass-through via higher passenger revenues may prove conservative given the pricing power the group commands in its core long-haul markets.
JP Morgan estimates IAG will have around €1.5 billion of excess cash headroom below a net debt to EBITDA ratio of one times by year-end.
Deutsche Bank also left its full-year 2026 profit and cash flow forecasts largely unchanged, noting that a roughly €100 million beat against its first-quarter EBIT estimate offset an increase in its forecast fuel bill from €8.6 billion to €9 billion, in line with IAG's own guidance.
It raised its assumption for full-year passenger unit revenue growth to 4% from 1%, citing positive forward booking commentary from IAG and its peers as well as data from its own fares tracker. Deutsche Bank carries a buy rating and a 460p target price.
Panmure Liberum also has a buy rating on the stock, with a 590p target price.