Lawrence GashAfter a torrid few days International Consolidated Airlines Group (IAG) has seen its share price rebound in Tuesday trading. By mid-afternoon the Anglo-Spanish firm, whose subsidiaries include British Airways, Iberia and Aer Lingus, saw its share price gain by 6.28 per cent to stand at 460.30 pence.
The ongoing coronavirus epidemic has haemorrhaged travel firms across the world in recent weeks, particularly airlines and cruise operators as tourists refrained from travelling and multiple international business conferences were cancelled.
Until recently for many companies their main concern in relation to the Covid-19 outbreak was the disruption of supply chains triggered by the widespread shutdowns in mainland China. However, the arrival of the virus across the world in South Korea, Iran and Italy sent major stock indices into a tailspin.
Trade International Consolidated Airlines Group SA - GBP - IAG CFD
The spread from Italy to France, Spain, Germany and the United Kingdom resulted in heavy losses for euro-centric travel firms. In the past 5 days alone IAG’s share price fell by 16.71 per cent, wiping more than £12bn ($15.3bn, €13.7bn) wiped off its valuation. Its competitors did not fare much better, easyJet (EZJ) and Ryanair (RYA) fell by 11.05 and 7.38 per cent respectively.
Both companies are up in mid-afternoon trading but not as much as IAG. This could be in part because investors feel that those who sold last week overestimated the spread of the virus in Spain but is mainly a consequence of the company’s strong fundamentals.
IAG published its full year results at the end of February. Although its operating profit did fall by 5.7 per cent, this was a result of higher fuel costs rather than mismanagement or waning popularity. Indeed, its strong 5.1 per revenue growth has likely attracted some investors despite the short-term headwinds.
More generally, despite the increasing number of cases in Western Europe and the United States, markets on both sides of the Atlantic have been buoyed by talk of upcoming stimulus to soothe any difficulty. Finance ministers from the G7 group of nations have announced their willingness to use “all appropriate policy tools” to reduce the current uncertainty.
