IAG Share Price Forecast December 2021 – Time to Buy IAG?

Shares of Anglo-Spanish multinational airline holding company IAG (LSE: IAG) are in the red today, currently trading at £140.78 at the time of writing. The FTSE 100 British Airways owner International Consolidated Airlines Group is facing one of the worst times in the company’s history, recently reaching the lowest level of 126p in the year. Travel stocks have been hard hit, with the recent arrival of the Omicron variant derailing whatever progress they had made in 2021.

IAG – Technical Analysis

IAG’s financial statement indicates a market cap of £7.117 billion with total assets worth £28.725 billion. Revenue for 2020 was at £6.99 billion with a profit margin of -87.99% compared to £22.38 billion in 2019.

Oscillators for IAG such as Relative Strength Index (14)(49.08),  Stochastic %K (14, 3, 3)(78.53),  Commodity Channel Index (20)(50.31),  Average Directional Index (14)(26.09) are neutral. Moving averages such as Exponential Moving Average (10)(139.77), Simple Moving Average (10)(137.16),  Exponential Moving Average (20)(139.99) and Simple Moving Average (20)(136.64) are indicating a buy action.

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Recent Developments

IAG recently completed a deal alongside Air France-KLM with Global distribution system operator Travelport.  The deal would allow the two airlines to channel New Distribution Capability content through its Travelport Plus platform. As a result, Aer Lingus, British Airways, Iberia and Vueling will be able to offer travel retailers a wider range of content such as the NDC content and services via Travelport’s point-of-sale Smartpoint product or through API connections.

IAG has been struggling for quite some time due to its weak balance sheet, old fleet and high-cost base. The arrival of the new Covid-19 variant Omicron equates to stricter controls over international travel. This will result in lost revenue for IAG and other travel-focused businesses. It is not the only airline group finding times tough at the moment. But the company does have a few positives on its side, such as past brand marketing investment paying off over the next few years and access to €10.6bn cash in the form of loans.

IAG’s proposed takeover of Spain’s Air Europa has apparently fallen through. The value of the acquisition, which was finalised in November 2019, was reduced during the global health crisis. It finally fell through after it came under scrutiny by relevant authorities. While the deal would have benefited the stock in the medium-to-long term by boosting Iberia’s slot share in Madrid from less than 50 per cent to 60 to 70 per cent, it might be a good thing for IAG’s share price at the moment.

IAG indicated in its 2020 annual reports that passenger numbers were down 66.5% from 2019 levels. It was still only 21.9% of 2019 levels in the second quarter. Management will also have to solve a growing debt pile that has increased from €7.9 billion to €12.1 billion. IAG demonstrated this need vi the rights issue of £2.5 billion.

Should You Buy IAG Shares?

The extreme uncertainty at the moment means there is a risk of further falls in IAG share prices, especially as the end of the pandemic is so hard to call. Many predict passenger levels won’t recover before 2024. Even with all of these developments, IAG still has a lot of hurdles to cross before it can return to its pre-pandemic state. The biggest challenge would be to increase passenger numbers. Before it can show some progress on that front, investors should stay away from these shares.

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