International Consolidated Airlines Group SA

International Consolidated Airlines Group SA (LON: IAG) is one of the world’s largest airline group, headquartered in London, United Kingdom. The group has 573 aircraft carrying around 113 million passengers to 268 destinations each year.

Financial Highlights – 9M financial year 2019 (30th September 2019, EUR, million)
For the nine months of the financial year 2019, the company’s total statutory revenue grew by 5.7 per cent to €19,399 million as compared to €18,346 million for the same period of the last year due to the steady growth of both passenger revenue and other revenue. Statutory operating profit (before exceptional items) declined by 9 per cent in comparison with the last year data mainly due to an increase in the operating and administrative expenses for the period. Statutory Operating profit (after exceptional items) declined from €3,159 million in nine months FY2018 to €2,520 million in nine months FY2019. Adjusted earnings per share fell by 1.4 per cent to 88.7 Eurocents in 9M FY19 as compared with the corresponding period of the last year. On 30 September 2019, the cash was €7,838 million, and net debt to EBITDA stood at 1.2 times, and it was in line with 2018. The net debt reduced by 3.9 per cent to €6,179 million in nine months FY2019 against the same period in 2018. Interim dividend per share was 14.5 Eurocents.

Share Price Performance

Daily Chart as of February 12^th, 2020, before the market close (Source: Thomson Reuters)

International Consolidated Airlines Group SA shares were trading at GBX 637.60 at the time of writing before the market close (at 9:29 AM GMT) on 12^th February 2020 and were up by 1.33% versus the previous day closing price. Stock's 52 weeks High is GBX 684.00 and Low is GBX 411.50. The shares of the company have delivered a negative return of 2.96 per cent in the last month. The company’s stock has given investors 17.94 per cent of a positive return in the last three months.

Conclusion
During the third quarter of the financial year 2019, the company has delivered mixed financial performance. The company’s business performance was hampered by the disruption containing threatened strikes by Heathrow airport employees and Industrial action by pilots' union BALPA (British Airline Pilots’ Association). At existing fuel prices and exchange rates, the company anticipates it’s full-year 2019 operating profit would decrease to €215 million (before exceptional items) against the 2018 pro forma of €3,485 million.With China Southern Airlines, British Airways signed a joint business contract. This will benefit clients by adding more destinations between China and the UK with a greater choice of flights and improved frequent flyer benefits. The group has consistently delivered a ROE above 20 per cent for the last five years, which is a robust fundamental indicator and shows management efficiency. The company provide an opportunity to invest for the long term.

Based on the above rationale, we have given a "Hold" recommendation at the current price of GBX 628.85 (as on 12th February 2020, before the market close at 8:15 AM GMT).

Easyjet Plc

EasyJet Plc (LON: EZJ) is a low-cost European point-to-point airline company. The company has four geographic segments, which are differentiated according to the origin country. The segments include the United Kingdom, Southern Europe, Northern Europe and Other.

Trading Update – Q1 Financial Year 2020 (31st December 2019, GBP, million)
In the first quarter of the financial year 2020, the company’s total revenue grew by 9.9 per cent to GBP 1,425 million as compared to the first quarter of the fiscal year 2019 due to robust demand as well as low capacity growth by EasyJet. Total airline revenue per seat on a reported basis was GBP 58.56, up by 8.7 per cent, as compared to GBP 53.89 in the same period of FY2019. At constant currency basis, total airline revenue per seat has increased by 8.8 per cent to GBP 58.63 versus 53.89 in Q1 FY2019. Total passengers have increased by 2.8 per cent to 22.2 million against 21.6 million. Total airline headline cost per seat on a reported basis was GBP 58.40, up by 3 per cent, against GBP 56.71 in Q1 FY2019. At constant currency basis, total airline headline cost per seat has increased by 2.6 per cent to GBP 59.41 against GBP 56.71 in Q1 FY2019.

Share Price Performance

Daily Chart as of February 12^th, 2020, before the market close (Source: Thomson Reuters)

EasyJet Plc shares were trading at GBX 1,547.5 at the time of writing before the market close (at 10:20 AM GMT) on 12^th February 2020 and were down by 0.25% versus the previous day closing price. Stock's 52 weeks High is GBX 1,567.00 and Low is GBX 840.00.

Valuation Methodology

*Peers: Air China Ltd, Wizz Air Holdings Plc and Ryanair Holdings Plc.

Conclusion
The company has delivered a decent financial performance during the first quarter of the financial year 2020. The company has launched easyJet holidays successfully, which could benefit the growth of the company. The Group has increased its expectations for H1 revenue per seat at constant currency. The company expected full-year foreign exchange movements to have a GBP 70 million positive impact on headline profit before tax. Environment and sustainability issues such as climate change, etc. could affect the revenue and profitability of the company. Any change in regulations and government policies could affect the overall business of the company. Macroeconomic and geopolitical factors could affect the performance of the company. Failure in cybersecurity and a critical data breach could hamper the operations as well as the reputation of the company.

Based on the above rationale, we recommend investors to keep a “Watch” on the stock at the current price of GBX 1,565.10 (as on 12th February 2020, before the market close as at 8:45 AM GMT), with support from few catalysts needs to be evaluated at a later stage. 
 
*All forecasted data and peer information have been taken from Thomson Reuters.

Disclaimer

PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.
References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.
This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332.
The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated.
Kalkine do not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser.