British Airways owner International Consolidated Airlines Group SA (LON:IAG) has been downgraded to ‘neutral’ from ‘outperform’ by analysts at Davy Research as they worked out the effects of the company’s proposed “painful rights issue” announced at the end of July.
In a note on the airline sector on Wednesday, Davy’s analysts predicted the €2.75bn fundraising will be “at least 50% dilutive” and assumed a “slower recovery versus the current capacity planning scenario” which is expected to drop 35% compared to 2019.
Announcing the rights issue on July 31, IAG said the money will provide support for its balance sheet and help it withstand a prolonged downturn in air travel due to coronavirus restrictions.
Willie Walsh, IAG’s chief executive, said the money would put it in the strongest position possible ahead of a recovery, though he added he does not expect this now to be until 2023.
IAG’s downgrade also formed part of the broker’s wider assessment of the airline sector, predicting that inter-continental and corporate travel “look certain to recover later than continental/leisure travel”.
“We don’t know yet whether their restructurings will enhance or weaken competitive positioning when we see other global airlines restructuring”, Davy said.
Shares in IAG were 2.1% lower at 214.2p in mid-morning trading.