International Airlines Group (LON: IAG) (MC: IAG), the owner of British Airways, Iberia and Vueling, among others, reports that profits are likely to be above currently expected numbers. This is good news, obviously, as we've all rather been waiting for the answer about what happens after lockdown. We've been able to see in the short haul sector (Ryanair, Whizz, Easyjet) that traffic has returned but that's a rather different market sector. Flying weekend partygoers around Europe is a different thing from the intercontinental business class revenues that BA and the like depend upon. We've had indications, but not certainties, that that second business line is going to return after those disruptions. Perhaps it would end up like commercial property, where work from home is slashing prices? Maybe it would be like online shopping, where volumes quickly returned down to more normal levels after lockdown surges?
IAG gives an update to expected profits: “We are seeing healthy forward bookings with leisure demand particularly strong while business travel continues to recover more slowly.” We are seeing just what we'd like to - business travel returning even if more slowly than leisure.
IAG share price from London Stock MarketWe also have: “The owner of airlines including Iberia, Aer Lingus and Vueling on Friday said it expected full-year operating profit before exceptional items to be above the €1.8bn to €2.3bn range it forecast in February.” Which is also clearly positive for the share price. The full announcement is here.
All of which really leaves us with the puzzle of why the share price rise is so muted? The answer being that we get a lot of information about the airline business. Traffic numbers can be reverse calculated from airport throughput, for example. Other airlines report at different times so we gain at least an insight into how the market sector is doing. So the actual announcement of results tends not to be an inquest into how travel itself is doing. Rather, into how well management is taking advantage of whatever that level of transport is. So, results which show general improvements, well, yes, but we've already incorporated much of that into the share price as we know it from other sources.