Core Viewpoint - IAG has demonstrated strong financial performance in Q2, with significant revenue growth and profitability, but faces challenges in the North American market that may impact future performance [4][10][12]. Financial Performance - Total revenue increased by 6.8% to €8.86 billion, driven by a 4.9% rise in passenger revenue to €7.77 billion and a 9.9% increase in cargo revenue to €311 million [5]. - EBIT surged by 35.4% to €1.68 billion, exceeding consensus estimates, primarily due to lower fuel costs, with fuel CASK down 12.7% to 1.99¢ [8]. - Pre-tax profit rose by 33.0% to €1.51 billion, and EPS increased by 27.6% to 23.6¢ [8]. Passenger and Cargo Dynamics - Passenger growth was impacted by a 0.8% decline in passenger numbers to 31,624k, leading to a load factor decrease of 1.3% to 85.4% [6]. - The growth in passenger revenue was supported by a combination of capacity expansion and yield improvement, although the growth rate in RASK slowed to 2.6% [6][7]. North American Market Concerns - The North American market showed its first contraction in RPK in nearly three years, with passenger numbers down 1.6% to 3,655k, raising concerns about overcapacity and potential downward pressure on ticket prices [10][11]. - Management noted a stabilization in NA ticket yields and flat capacity expectations for Q3, which may help preserve yields [12]. Future Outlook - The company anticipates a rebound in yields in other regions, particularly Iberia, driven by strong demand between Spain and LATAM [14]. - The introduction of a new revenue management system is expected to enhance yield management and customer spending [17]. - Despite current challenges, the company remains optimistic about long-term growth, projecting a price target of 470p, close to its historical high [18].
IAG Share Price: Potential To Return To Pre-Pandemic High