RBC Capital Markets has raised its price target on International Consolidated Airlines Group SA (LSE:IAG), the owner of British Airways and Iberia, to 500p from 465p.
Analysts Ruairi Cullinane and Jakub Glinkowski kept their Outperform rating, describing the group as their preferred play on constrained long-haul capacity.
The shares closed at 418.70p, leaving implied upside of about 22% once dividends are included.
The bank expects long-haul capacity to remain tight on several of IAG's home markets through the winter and probably beyond.
European network airlines are holding back growth, with capacity falling year on year on UK long-haul routes and on North Atlantic routes from the UK and Ireland.
RBC says that backdrop should support British Airways and Aer Lingus, both of which lean heavily on transatlantic flying.
Seven of IAG's ten most profitable destinations are in North America, underlining its exposure to transatlantic demand.
IAG itself plans to trim group capacity by around 1% in the fourth quarter, while expanding its Spanish carrier Iberia, with flights to and from Spain up about 6%.
The analysts forecast earnings per share growing at a compound annual rate of about 18% over the three years from 2026, helped by revenue growth, margin recovery and share buybacks.
They lifted earnings per share estimates by 3% on average across 2026 to 2028, mainly on lower net interest costs.
The forecasts still sit below market consensus at the operating level, reflecting higher fuel prices in recent months.
IAG is expected to deliver a sector-leading operating margin of 12 to 13% this year, within its 12 to 15% medium-term target.
RBC also flags a cash return yield of 7 to 8% over 2026 and 2027, combining dividends and buybacks.
Despite those returns, the group trades at about 7.5 times forecast earnings, a discount to European rivals with weaker margins.
The revised target values IAG at roughly 4.1 times the bank's 2027 estimate for enterprise value against core earnings.
RBC's more bullish scenario points to 650p should business travel keep recovering, against a downside case of 200p.
