JPMorgan upgrades British Airways owner IAG to ‘overweight’

JPMorgan Cazenove upgraded shares of British Airways owner IAG on Tuesday to ‘overweight’ from ‘neutral’ as it said that while 2021 is expected to remain very challenging, the prospects for 2022 onwards "look promising as global air travel starts to normalise".

"We anticipate turbulence on this journey but consider IAG an attractive long-term investment," JPM said.

The bank, which lifted its price target on the stock to €2.85 from €1.66, noted that in the last month, the rate of vaccinations in continental Europe has meaningfully increased. "It is still unclear when widespread intra-European travel will be allowed, but by late summer we would expect a meaningful pick-up across the region," JPM added.

It also pointed to the fact that the European Commission President has suggested American tourists who have been fully vaccinated will be allowed to visit the EU this summer.

"In 2019 IAG operated 29% of its capacity to/from N. America; we believe this is IAG’s most profitable market given the amount of premium traffic," it said.

JPM said that before Covid, IAG was one of the most profitable airlines in Europe.

"By 2023-24 we believe IAG can generate a 12-15% group EBIT margin, in line with its pre-Covid performance and goals."

At 1015 BST, the shares were up 2.1% at 206.95p.