The IAG (LSE: IAG) share price hasn’t exactly had a smooth flight trajectory in recent years. I want to know if the shares could fly high once more and if I should buy some shares for my holdings.
IAG share price reviewed
As I write, IAG shares are trading for 155p. At this time last year, they were trading for 99p, which is a solid 56% increase over a 12-month period. This is during a time when many UK stocks have struggled due to soaring inflation, rising interest rates, and a cost-of-living crisis.
IAG shares were in a much better position prior to the pandemic, back in 2020. In January 2020, they were trading for 444p, which is a 65% drop at current levels. Global lockdowns, and restrictions on domestic and international travel severely hampered the aerospace sector.
It seems to me like since the pandemic, the world is battling one thing after another, which is why the IAG share price hasn’t quite hit the heights of previously. Some of these events include a post-pandemic hangover, geopolitical tensions, and soaring inflation, all of which have caused higher fuel prices and labour costs.
Where will the IAG share price head next?
Personally, I’m not expecting to see IAG shares reach pre-pandemic levels for a while, say three to five years, if ever.
It has too many factors to contend with right now. These include some of the issues I alluded to earlier. Rising fuel and labour costs are severely pressuring profit margins. This is one of the biggest factors why the IAG share price hasn’t taken off despite heightened demand for travel. These types of issues aren’t easy or quick fixes.
However, one thing that could propel IAG shares upwards is its rumoured acquisition of the Portuguese national carrier TAP. The business looks in good shape, recording a profit for its most recent year compared to a loss last year. When you add to this that IAG could shrewdly integrate operations, there are efficiencies to be had which could boost overall performance and shares. That said, there’s no deal done yet.
Investment viability today
There is lots to like about IAG for me personally. As one of the biggest airlines in the world, it has an excellent profile and presence which it can translate into performance and payouts.
Furthermore, IAG may be reintroducing its dividend, which would be great. Pension issues have dogged it despite pleasing post-pandemic travel demand and recovery. However, in December, it signed an agreement with New Airways Pension Scheme (NAPS). The agreement contained certain caveats, one of which was no dividend payments in 2022 and 2023. City analysts are predicting a 1.2% dividend yield in 2024, and 2.6% in 2025. However, dividends are never guaranteed and forecasts don’t always come to fruition.
Finally, IAG shares look good value for money to me on a price-to-earnings ratio of four.
Overall, despite the meandering nature of the IAG share price, there is too much uncertainty for my liking. For that reason, I’ll keep IAG shares on my watch list.
