Ramp-Up Challenges at British Airways a Drag on International Airlines Group Recovery

International Airlines Group, owner of British Airways and Iberia, is lagging peers in the recovery. The group downgraded capacity guidance for the full year to 80% of 2019 levels, from 85% previously, due to constraints at British Airways. Staff shortages, high absence rates, IT problems and issues at Heathrow are hampering the ramp-up effort of British Airways, the biggest contributor to group sales. Issues are being addressed urgently, but could take a couple of months to resolve, especially outdated IT infrastructure, which urgently needs to be upgraded. Financial guidance has been maintained and the group still expects to be profitable on an operational level from the second quarter onward and for the full year. We will make slight adjustments to our forecasts, but do not expect any meaningful change to our GBX 270 fair value estimate. Shares appear attractive but we caution investors about our very high uncertainty rating for the firm due to high levels of indebtedness.