For anyone following us this past year, which admittedly is probably not many given our very recent website launch, you will know we are long-term bullish on IAG (LON: IAG) and airline stocks in general…
However, it hasn’t been smooth sailing, and while we are still bullish, several issues have arisen for airlines, sending IAG shares over 27% lower in 2022.
Of course, travel restrictions relating to the Covid-pandemic are where the issues began.
Staffing issues at airlines and airports (as a result of Covid-related layoffs) led to chaos at airports. Over the summer, thousands of flights were cancelled as carriers struggled to keep up with demand. As a result, there were caps put in place at certain airports — some of which are still in place. For example, a maximum of 100,000 passengers can depart Heathrow every day through October 29…an issue for IAG and especially British Airways.
Elsewhere, surging fuel prices stemming from Russia’s invasion of Ukraine further heaped pressure on airlines. While IAG said its fuel hedging program was worth about 1.2 billion euros ($1.2 billion), it was still impacted.
Despite the negatives, including high debt and an economic slowdown, we are still positive long-term. Here’s why:
At MoPh Markets, we focus on online demand metrics to understand a company’s current and potential future performance, using website, social media, and Google Trends data.
According to Google Trends data, searches for British Airways in the UK are now at pre-pandemic levels, showing strong demand for one of the company’s leading carriers.
In addition, searches for Iberia (which flies to destinations in Europe, Africa, the US, Central America, and South America) in Spain are also at pre-pandemic levels, while searches for Vueling, which has routes across Europe, topped pre-pandemic levels back in June.
With British Airways and Iberia being the two prominent carriers for IAG, we are focusing on their website traffic.
According to Semrush, traffic to the British Airways website is approaching all-time highs (since they began recording data in 2012). It is currently on course to reach that level in the next few months, sitting at 8.5 million, below the 9.13 million achieved in June 2020.
We assume the June 2020 levels were a result of pandemic fatigue when everyone was trying to get away, and some lockdown restrictions were easing.
For British Airways, business travel is essential. There are articles online with contrasting views. For example, an article from Travel Daily Media says it is making a “strong comeback,” while this article from Quartz says it will “never make a comeback.”
We see business travel on the comeback trail, but slowly. However, given the current economic environment, it may take even longer than initially expected.
Meanwhile, for Iberia, web traffic is even better, hitting all-time highs of 5.48 million in September, demonstrating again that demand for IAG carriers is robust.
While we acknowledge that headwinds such as inflation, debt, staff, and the economic slowdown weigh on IAG’s business… current demand metrics give us confidence.
While the saying “being early is the same as being wrong” definitely applies to our previous positive stance on IAG, demand data see us maintain our bullish thesis.