Dear IAG shareholders, please brace yourselves for 27 February
International Consolidated Airlines Group (LSE: IAG) shares have had a turbulent decade. The British Airways owner almost went to the wall during the pandemic as global fleets were grounded, and it was only saved by a mighty â¬2.74bn rights issue and piles of debt.
In September 2022, the share price fell below £1. Investors who boarded thinking they were bagging a bargain needed strong nerves, but within two years, theyâd more than quadrupled their money. With the shares at £4.30 today, a £10,000 investment at the lows would have swelled to roughly £43,000. That’s a 333% capital gain. Momentum has cooled, but the stock is still up 30% over 12 months.
Flying FTSE 100 growth stock
The valuation for IAG, as it’s commonly called, no longer looks distressed. The price-to-earnings ratio is around nine, well above the rock-bottom multiple of three or four at the start of the recovery, yet still modest for a company with strong cash flows.
As flying rebounded, the group repaired its balance sheet at pace. In 2024, free cash flow climbed to â¬3.56bn, up from â¬3.02bn in 2023. That helped cut net debt by another â¬1.73bn. Net debt is down from a peak of around â¬13bn in 2020 to â¬7.5bn at the half-year stage in 2025 (30 June).
Dividends have returned, albeit with a modest trailing yield of about 1%. The group is also buying back shares. In the first half of 2025, it returned â¬1.5bn to shareholders via dividends and share buybacks.
Not all airlines have soared. Budget carrier easyJet, also in the FTSE 100, continues to find conditions tougher given its heavier exposure to price-sensitive European consumers. By contrast, IAG benefits from resilient premium transatlantic traffic, particularly business and high-end leisure travellers. Its other airlines, including Iberia and Vueling, have also been steady.
It’s full-year results time
On Friday (27 February), the group publishes full-year results. In 2024, operating profit jumped 27% to â¬4.44bn on revenues up 9% to â¬32.1bn. It actually picked up speed in the first half of 2025, with operating profit up 43.5% to â¬1.88bn. Revenues rose 8% to â¬15.9bn. Lower fuel costs and favourable foreign exchange movements helped, although there were hints of moderation in the second quarter.
Consensus forecasts point to full-year 2025 operating profit of roughly â¬4.7bn to â¬4.9bn. The market will also look for good news on margins, further debt reduction, dividend and buyback generosity and a positive 2026 outlook. Expectations are high though. Any miss will be punished.
A low-ish P/E doesnât automatically signal a bargain as aviation remains an inherently risky business. Pandemics, wars, volcanic ash clouds or striking air traffic controllers can all disrupt profits at short notice. The US economy has been strong, supporting lucrative North Atlantic routes, though uncertainty lingers.
I still think IAG shares are worth considering, but only with a long-term view. The explosive post-Covid rebound is probably behind us and growth likely to normalise. Even so, with ongoing deleveraging, dividend progression and buybacks, the rewards should continue to land. Fridayâs results should tell us more.
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Harvey Jones has positions in International Consolidated Airlines Group. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
