Berenberg lowers target price on IAG, cites 'extreme uncertainty' going into winter

Berenberg said IAG's bookings and cash burn ambiguity were "approaching a peak", in its view, leading it to again push out its 2021 demand recovery expectations to roughly 45% of 2019 revenues.

"Due to such uncertainty, management would not provide expected Q4 operating cash burn. IAG expects in Q4 to return less than 30% of 2019 capacity. We view this level as responsibly conservative, as the group can ramp up capacity through its recently increased proportion of variable costs," said the analysts.

The German bank also said that details of IAG's Air Europa acquisition, employee cost restructurings and wide-ranging management changes had worried many investors.

However, while Berenberg lowered its price target on the stock, it also focussed on upside-tilted risks around a change in booking patterns - as well as downside protection from over €9.0bn in liquidity.

"Bookings remain subdued as public health lockdowns are imposed across Europe. Management highlighted that corporate revenue exposure is below 15%. We think the perception of IAG as an all-premium airline may lead to positive surprises as non-business travel recovers more quickly," added Berenberg, which left its 'buy' rating on the stock unchanged.