IAG Earnings: Turbulence Ahead for BA Parent?

Parent company of British Airways, IAG, is trying to recover, but there are indications that the upcoming earnings report might not give investors much cause for celebration.

Flying Through Tariff-Laden Skies

At the beginning of the year, it appeared that European airlines were poised for a banner year, and with strong summer bookings, this might still be the case – except for those airlines exposed to the Transatlantic route. This is where the parent company of major airlines such as British Airways and Iberia, which are highly dependent on Atlantic crossings, could face some difficulties.

Meanwhile, in the wake of Trump's threats to impose tariffs on major European exports. As a result, IAG tumbled from its yearly highs, casting doubts on the company's ability to return to pre-pandemic price levels. Transatlantic travellers dropped by 17% in March, but the April numbers will not be available until IAG reports its Q1 earnings on Thursday.

According to the consensus compiled by the company, analysts expect IAG to report an operating income of €133 million, which would of €68 million. The company's share price more than doubled last year as travel in Europe picked up and fuel prices fell. However, it gave back half of those gains after the previous quarter's earnings.

Convincing the Investors

The company has a , but it also has a reputation for failing to satisfy traders. Its prior earnings beat expectations, and it offered to buy back €1.0 billion in shares. However, after the run-up in price, investors apparently wanted even more and subsequently punished the share price. The company also for the year, stating that earnings were expected to grow "sustainably" this year. Investors will be keen to see if there are any changes to that outlook in light of the changing trade dynamics.

The other point of interest for investors is likely to be the issue of capacity. All European airlines have faced delivery problems, as both Airbus and Boeing, in particular, have struggled to meet demand. Heathrow Airport suffered a power outage in March, which caused additional complications for Britain's flagship carrier. Meanwhile, Iberian operations were impacted by the Spanish blackout in April, which saw a 30% reduction in air traffic. However, earlier in the month, with capacity expected to return to near pre-pandemic levels.

IAG Double Top Dilemma

IAG formed a double top pattern earlier in the year at 360 pence but tumbled to 210 pence, though it has since recovered to 290 pence. If the upside momentum continues above 300 pence and the swing of 320 pence, the stock could revisit its 2025 peak. However, if bulls fail to maintain momentum, the stock could slide back into the channel and 250 pence, opening the door to 225 pence and 210 pence, and eventually the lower channel, where the 200 pence coincides. Losing that support might expose IAG to 160 pence.

Source: SpreadEX / IAG

Key Takeaways

IAG is trying to stage a recovery, but its upcoming earnings report might not satisfy investors while trade tensions persist and the company relies on Transatlantic routes. The company’s reluctance to provide guidance last time around and subsequent share price declines underscore the difficulty in convincing traders of its prospects, with investors likely waiting to see if the company announces any changes to the outlook and capacity plans.