British Airways owner IAG was the top riser on the FTSE 100 as investors latched on to bullish comments about business passengers from transatlantic rival United Airlines.
Jack Kirby, United’s chief executive, forecast a return to profit in its second-quarter even though it posted a near US$1.4bn loss in the first three months.
Strong consumer demand, a recovery in operating margins to 2019 levels and particularly a resurgence in business passengers were behind his bullishness, said Kirby.
Like United, business travel is a big part of BA’s revenue and shares in the UK carrier jumped almost 8% 155.2p as investors made a read-through to its operations.
That share jump came despite a price target cut from Peel Hunt, which cited “uncontrollable factors” including higher oil costs, proliferating Chinese Covid-19 cases, travel restrictions in South-East Asia and BA’s own IT problems.
Peel Hunt is still expecting a return to profit this year for the airline owner, but less than previously.
Its forecast for underlying profits for 2022 and 2023 are now €495mln and €1.84bn, down from €997mln and €2.29bn previously thought it added it had been at the high end of consensus estimates.
The broker is more worried about China than fuel costs, which it says should be temporary and passed through in higher fares.
However, the Chinese Covid outbreaks recently will hinder recovery in what should be a growth area for the business and eventually account for 10% of passenger revenues.
Peel Hunt’s price target reduces to 177p from 184p with a hold rating.