British Airways owner IAG’s shares price hit a ten-month today on fears that it might have to raise more money to fund it through the current travel crisis.
IAG has been urging the government to reopen transatlantic routes as fast as possible, especially to the US which traditionally has been a substantial earner for British Airways.
That prospect though seems to be receding again, especially with the Delta variant of the virus spreading rapidly in other parts of the world.
Hopes that the UK rules on travel might be changed yesterday were disappointed when PM Boris Johnson only said that details would be revealed ahead of the next formal review at the end of the month.
Johnson had been expected to confirm the end of the traffic light system and also to scrap PCR tests for people who had been double-vaccinated.
Maintaining a strong border and monitoring new variants of coronavirus were also highlighted as key parts of the government plan, again raising the possibility of further delays.
Last week, Credit Suisse (NYSE:CS.) reduced its target price on IAG shares to 195p from 256p highlighting the lack of transatlantic travel.
“We are conscious that until the Transatlantic market re-opens unfettered the investment case will remain challenging.”
The Swiss broker is still upbeat on recovery prospects for the airline owner, but said that on its forecast net debt would have risen to €13.5bn by the end of December 2021.
Credit Suisse noted that having raised €2.7bn in the third quarter of last year, it has assumed a further €2.7bn raise at €1 per share in its new forecast.
Rival easyJet recently raised £1.2bn in a heavily discounted rights issue, with chief executive Johan Lundgren saying that post-Covid was a "once in a lifetime opportunity".
British Airways has already dusted off plans for a new low-cost carrier based at Gatwick Airport, though it needs union agreement for this to go ahead.
Shares today dropped 3% to 137.9p, a level that was last seen in November last year, which suggests some are betting that might not be the end of its recovery plans.