The ( ) share price has done well lately. Since the end of June, it’s been the best performer on the . And here’s why I think this rally isn’t over yet.
More air travel According to the International Air Transport Association, there will be 4 billion more journeys in 2043, than in 2023 — an annual growth rate of 3.8% per annum. If IAG could match this, it would mean an extra 200m flights sold in 2043.
During the year ended 31 December 2023 (FY23), revenue per flight was €223. If this was the same in FY43, additional annual turnover of €44.6bn (127%) could be generated.
Lower fuel costs In FY23, fuel, oil and emissions charges accounted for 29.1% of operating costs. Not surprisingly, the price of jet fuel closely matches that of Brent crude.
With a barrel of oil currently (30 September) costing around 20% less than it did a year ago, this should help boost earnings. Some of this positive impact is offset by the fact that IAG buys a proportion of its fuel needs in advance at a fixed price. However, it doesn’t hedge all of its requirements so there will be some benefit from falling oil prices.
Reduced interest payments Like most airlines, . At 30 June 2024, it was €16.1bn.
Some of this attracts interest at a variable rate. With the cost of borrowing starting to fall, this should help reduce interest costs. These were €1.
1bn in FY23. Lower landing fees Another positive is the Civil Aviation Authority’s decision to reduce the cap on landing fees that can be imp.