IAG hopeful about transatlantic restart, BofA says

British Airways owner IAG is flying 20% of capacity and doesn't expect any meaningful increase before 17 May when UK travel is scheduled to restart, IAG officials told BofA.

"IAG views progress in vaccination rollout in the UK and US positively for transatlantic travel," BofA said. "A potential UK-US reopening in May would be very positive and ahead of expectations. All IAG airlines can ramp up to >70% capacity at short notice."

BofA said it expected a travel recovery for airlines this summer despite recent headlines about tougher restrictions.

Travel and leisure companies are cautiously optimistic about rising demand, the bank said, keeping IAG and easyJet as its top airline picks. After early problems the EU's vaccine programme will pick up in the second quarter, allowing easing of travel restrictions, BofA said.

IAG's summer bookings have increased since the UK government's travel announcement although most bookings are for last-minute essential travel. Spanish and Latin American routes are the strongest.

The company is ready to enter markets as rivals pull out or cut capacity, investor relations chief Andrew Light told BofA. The company is also comfortable with its €10.3bn of liquidity.

EasyJet bookings have surged when travel restrictions have loosened and is seeing interest in its 2022 programme earlier than usual, chief operating officer Peter Bellew told BofA. The company is not feeling fare pressure from competitors and is clamping down on costs, Bellew said.

BofA kept its 'buy' ratings on both airlines. It left IAG's price target at 250p and raised easyJet's target to £11.50 from £11.

IAG shares rose 1.3% to 196.15p at 14:49 GMT and easyJet shares rose 2.6% to 966.14p.