IAG shares were upgraded to Buy from Neutral at Redburn on Tuesday, sending IAG shares up over 2% on the day.

Redburn stated that IAG’s earnings recovery appeared to be ‘materially’ underappreciated by consensus estimates, a fair conclusion given the significant recovery seen over the last year across the travel industry.

Redburn added that the recovery is being led by margin improvements at British Airways, the group’s biggest airline, as costs are normalising and pricing remains robust.

IAG has risen over 11% so far this year, a marginal recovery as it has yet to reach its pre-pandemic levels. The airline industry was one of the hardest hit sectors during the Covid years, but it seems not even soaring inflation or the cost-of-living crisis has been able to keep consumers away from travelling.

IAG reported revenue of €23bn in 2022, up 172.8% on a restricted 2021 and just below the €25.5bn revenue achieved in 2019. The airline group was also able to report its first annual profit since before the pandemic.

Both IAG and the airline industry still face issues of an uncertain environment in 2023, but demand has yet to waver. Organic traffic to the British Airways website is currently above pre-pandemic levels, according to Semrush, and IAG anticipates operating profit to be between €1.8bn and €2.3bn in 2023.

Furthermore, IAG’s price target was lifted by JPMorgan at the beginning of the month, increasing to €2.20 from €2.00.