The last few years have seen IAG (LSE: IAG) suffer as global travel was halted due to the pandemic. The stock’s price slumped over 60% in 2020, and it wasn’t alone in its struggles as practically all airline stocks took a beating during the turbulent period. However, as borders slowly began to reopen, and life started to return to (almost) normal, the IAG share price had been gradually creeping up in 2022.
Its fortunes changed when news emerged late last week that Russia had invaded Ukraine. The market’s response led to a 6.3% drop in the price on Thursday.
However, with the stock currently changing hands at around 148p — a slither of the 400p price we saw pre-pandemic — is now a good time for me to be adding IAG shares to my portfolio? Let’s take a look.
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The reopening of borders
A major boost for IAG will be the recent reopening of borders around the world. As more and more countries have eased the restrictions placed on international passengers, this should allow the firm to see an increase in passengers over the coming months. Further, some countries have lifted restrictions altogether, for instance, Sweden and Spain. And the benefits they reap from doing so may entice other countries to follow suit. According to the International Air Transport Association, around 3.4bn people will fly in 2022 – nearly double that of 2020. As such, this makes me believe buying IAG shares at the current price could be a steal.
Further, and as my colleague Andrew Woods stated, IAG may benefit more than competitors when it comes to the increased travel we should begin to see. This is because, unlike EasyJet and Wizz Air that focus on short-haul flights, IAG also operates transatlantic routes – estimated to be worth $1bn annually to the firm.
IAG also released its full-year results last week. And the numbers were encouraging. While revenues were up 8.3%, its post-tax loss had declined by 57.7%. When considering buying the shares, these numbers do sway me.
The risks
There are risks, however. The most obvious threat to IAG remains the pandemic. While it seems that the worst of it is over, there’s still potential for it to cause disruption in the future. Any sign of this would most definitely mean a drop in the price of IAG shares. With this said, Boris Johnson recently announced that the legal requirement to self-isolate due to a positive case has ended, showing further how the UK is taking strides to move away from the pandemic. This will provide a boost for the business.
My verdict
So, while a threat linked to the pandemic remains, I’m optimistic about what the future holds for IAG. The firm will see big benefits from the increase in passenger volume this year, and trading for well below half of the pre-pandemic levels I think IAG could be a solid buy. Its full-year results also provide me with confidence. As such, I would be willing to add IAG shares to my portfolio today.
