IAG is feeling the strain of higher oil prices and Russian airspace restrictions.

Overview

International Airlines Group (LSE: IAG) is a UK/Spanish consolidated airlines flag carrier consisting of British Airways, Iberia, Aer Lingus and some smaller airlines. Overall COVID-19 and increases in oil prices have done some serious damage to IAG from all sides.

Financials

IAG results for 2021 were released just recently and the numbers were poor, though showing some signs of improvement across the board. Total market cap now sits at £6.2bn with 2021 revenue at €8.45bn and loss after tax of €2.93bn. Both numbers are great improvements from 2020 (€7.8bn revenue with a €6.96bn loss). The balance sheet is also showing signs of improvements, total cash on hand sits at €7.8bn with total assets the highest they have been for some years at €34.4bn. Generally most asset components have risen in value. Looking at the liabilities though, theses have risen €33.57bn, (from €28,7bn) leaving net positive assets of just €830m. This is a very thin margin, for comparison the difference is just 2 boeing 747's within the IAG inventory. Total borrowings have increased from €13.6bn with €17bn along with payable ups and deferred ticket revenues so its important for IAG to ensure they can maintain their current levels. The full financials can be found here.

Technicals

From a technical aspect IAG looks negative. Less than 10 days ago IAG looked like it was heading towards the £2.00 level, however with oil prices rising over 25% in less than 2 weeks. IAG is now close to multi-year lows. Support for IAG sits at 89p. It is so crucial for IAG that this level holds. A break below here could could mean free fall. Towards the upside initial targets are £1.56 followed by £1.78 and then £2.00.

Summary

Given this is one of the most popular stocks on the LSE there are always buyers, so dips are usually bought into and when the stock falls like this often a relief rally occurs. If the price of crude continues to rise then IAG and other airlines are going to feel some pressure. Along with Russia closing airspace its making it more difficult for European-asian flight routes. At these levels IAG is cheap, but it could be cheaper. Longer-term, IAG looks positive given the improvements in revenue, losses and in their balance sheet expansion as travel is somewhat returning back to normal. Prices are rising, however, IAG can pass some of this cost onto the consumer.