GICS Sector : Industrials
International Consolidated Airlines Group, S.A., together with its subsidiaries, engages in the provision of passenger and cargo transportation services in the United Kingdom, Spain, Ireland, the United States, and rest of the world.The company operates under the British Airways, Iberia, Vueling, Aer Lingus, and LEVEL brands.It operates a fleet of 531 aircraft.
International Airlines Group (IAG) reported a robust third quarter 2025, with passenger revenue increasing by EUR 177 million or 2% year-over-year, driven by strong demand for travel across its network and brands. The group's operating profit increased by around 18%, and pre-exceptional profit after tax rose by approximately 20% to EUR 2.7 billion. Adjusted earnings per share increased by 27% to EUR 0.241, which was below analyst estimates of EUR 0.2809. The group's revenue performance was in line with guidance, with capacity growing by 2.4% and unit revenue declining by 2.4%, partly due to currency movements.
Publication Date: Nov -13
The group's operating companies delivered mixed results, with Iberia, Aer Lingus, and Loyalty showing strong profit growth, while BA and Vueling profits were slightly down year-over-year. Iberia's operating profit increased by EUR 56 million to EUR 510 million, with operating margins expanding by 2.2% to 23.7%. Aer Lingus also reported a significant increase in operating profit, up EUR 31 million to EUR 170 million, with operating margins rising by 3 percentage points to 21.6%. As noted by Luis Martín, the group's strategy is focused on delivering earnings growth at high levels of margin and return on capital, which will create substantial value for shareholders.
IAG's nonfuel costs continue to improve, with the group expecting nonfuel unit costs to increase by around 3% in 2025. Fuel costs are expected to be around EUR 7.1 billion. The group's outlook for the 2025 full year remains unchanged, with expectations for revenue and earnings growth, margin progression, and strong shareholder returns. The balance sheet continues to strengthen, with gross leverage reduced to 1.9x and net leverage decreased to 0.8x.
IAG's current valuation multiples are 6.71x P/E Ratio, 3.53x P/B Ratio, and 0.62x P/S Ratio. The group's Return on Equity (ROE) is 54.23%, and Return on Invested Capital (ROIC) is 13.82%. The dividend yield is 1.33%, and the free cash flow yield is 11.59%. With a Net Debt / EBITDA ratio of 1.38, IAG's financial position appears robust. The market seems to have priced in a reasonable level of earnings growth, and the current valuation multiples suggest that the stock may be fairly valued.
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British Airways' 2.8% growth is driven by increasing demand for premium travel, particularly in transatlantic routes, and a strong performance in cargo operations. Additionally, the airline's focus on cost reduction initiatives, such as fleet modernization and operational efficiencies, has contributed to its growth.
Iberia's 2.5% growth is driven by increased demand for leisure travel, particularly in Latin America and the Mediterranean, as well as cost savings from fleet modernization and operational efficiencies. Additionally, Iberia's strong brand presence and loyalty program contribute to its growth, along with strategic partnerships and codeshare agreements.
Vueling's 3.2% growth is driven by its low-cost carrier model, strong demand in European short-haul markets, and increasing popularity of its ancillary revenue streams. Additionally, IAG's strategic investments in digital transformation and operational efficiency have enhanced Vueling's competitiveness, allowing it to capitalize on market opportunities and drive growth.
Aer Lingus' 2.9% growth is driven by strong demand for transatlantic routes, increased capacity on key routes, and successful cost control measures. Additionally, the airline's focus on premium products, such as AerSpace and business class, has contributed to revenue growth. Furthermore, the airline's strong brand reputation and efficient operations have enabled it to maintain a competitive edge in the market.
IAG Loyalty's 3.1% growth driven by increased customer retention, successful loyalty program revamps, and strategic partnerships. Additionally, enhanced digital platforms and personalized offerings have boosted engagement, while expanded airline partnerships have increased earning opportunities. Effective yield management and targeted marketing campaigns have also contributed to the segment's growth.
IAG's Other Group Companies segment, with a 2.7% growth, is driven by increasing demand for aviation services, expansion of cargo operations, and strategic partnerships. Additionally, cost savings initiatives, fleet optimization, and investments in digital transformation are contributing to the segment's growth.
Flag carrier airline of the United Kingdom, offering passenger flights to over 180 destinations worldwide.
Flag carrier airline of Spain, offering passenger flights to over 100 destinations in Europe, America, and Africa.
Low-cost carrier airline, offering affordable flights within Europe.
Flag carrier airline of Ireland, offering passenger flights to over 100 destinations in Europe and North America.
Low-cost carrier airline, offering affordable flights within Europe.
Low-cost, long-haul airline, offering affordable flights between Europe and the Americas.
Cargo airline, offering freight services to over 350 destinations worldwide.
The threat of substitutes for International Consolidated Airlines Group S.A. is medium due to the availability of alternative modes of transportation such as trains, buses, and cars. However, the convenience and speed of air travel make it a preferred choice for many passengers.
The bargaining power of customers is high due to the availability of multiple airlines and the ease of comparing prices and services online. This gives customers the power to negotiate prices and demand better services.
The bargaining power of suppliers is low due to the dominance of International Consolidated Airlines Group S.A. in the market. The company has a strong negotiating position with its suppliers, which enables it to secure better deals.
The threat of new entrants is low due to the high barriers to entry in the airline industry. The high capital requirements, regulatory hurdles, and complexity of operations make it difficult for new entrants to establish themselves.
The intensity of rivalry is high due to the presence of multiple airlines in the market, leading to intense competition for market share. The company needs to constantly innovate and improve its services to stay ahead of the competition.
| Value | |
|---|---|
| Debt Weight | 73.21% |
| Debt Cost | 7.46% |
| Equity Weight | 26.79% |
| Equity Cost | 15.52% |
| WACC | 9.62% |
| Leverage | 273.26% |
Value: 4.4
Growth: 6.7
Quality: 7.9
Yield: 4.4
Momentum: 5.0
Volatility: 9.3
1-Year Total Return ->
Value: 2.6
Growth: 5.8
Quality: 6.2
Yield: 3.8
Momentum: 7.0
Volatility: 10.0
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Value: 7.3
Growth: 4.8
Quality: 5.0
Yield: 1.2
Momentum: 9.0
Volatility: 5.0
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Value: 8.5
Growth: 6.7
Quality: 4.2
Yield: 2.5
Momentum: 3.5
Volatility: 5.3
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Value: 3.2
Growth: 5.9
Quality: 2.6
Yield: 2.5
Momentum: 4.0
Volatility: 8.0
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Value: 4.9
Growth: 6.9
Quality: 6.2
Yield: 0.0
Momentum: 4.0
Volatility: 2.3
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