Lately, the International Consolidated Airlines Group (LSE:IAG) share price has been flagging. It currently trades at 131p, down 8% today and 29.5% in the past year. With first-quarter results released today, however, the company looks to be on a much better footing. As the owner of British Airways, Aer Lingus, and Vueling, IAG could be set for a much brighter year in 2022. Should I add to my current holding? Let’s take a closer look.
Passenger capacity
Let’s first unpack the results for the three months to 31 March. Some had forecast weak results, owing to the Omicron variant that impacted flying in January and February.
Passenger capacity for the period was 65%, however, up from 58% in the previous quarter. Furthermore, the firm expects capacity to grow throughout 2022.
For Q2, passenger capacity could be 80%. Q3 is forecast at 85% and the final three months of 2022 may be as high as 90%. This would mean a full-year average of 80%. This is the strongest indication yet that the business is on track for a return to normality.
With passenger capacity recovering, I think it may only be a matter of time until the financial results and the IAG share price start moving upwards.
Many countries across Europe and South America have also removed pandemic-related restrictions. As other countries join them, this can only be good news for IAG.
Recent financial results
The financial results mirror the capacity figures. For the first three months of 2022, the company reported an operating loss of €731m. This was a 25%+ narrowing of the operating loss from the same period in 2021, which stood at over €1bn.
What’s more, total revenue increased to €3.4bn from just €968m a year earlier. As a current shareholder, this is encouraging because it strongly suggests that people are returning to the skies in large numbers.
It’s also worth pointing out that the business managed to reduce net debt by 0.6% over the first three months of 2022. This was in the middle of a challenging operating environment posed by the Omicron variant.
Total liquidity also improved from €11.9bn to €12.3bn over the same period. The company expects to be profitable in the second quarter and for 2022 as a whole.
Some risks
There are, of course, some risks associated with the IAG share price. Firstly, rising oil prices translate into higher jet fuel prices. While some of IAG’s jet fuel is hedged at lower levels, price rises may eat into future profit margins.
There’s also still the added risk of a future pandemic variant slowing recovery in international travel. However, I think this would be a short-term issue if it arises.
Overall, the IAG share price has been beaten down, yet the company is starting to record better results. While there are risks, I think the current price represents a glaring opportunity to increase my holding. I will be buying more shares soon.
