Friday, September 22

IAG. The capital increase sounds in the market

The possibility that IAG is forced to increase capital continues to float in the market. The 12,000 million euros that the group has in cash are a necessary cushion to shore up the way out of the crisis and strengthen the balance, but it may be insufficient.

The investment firms that follow the company acknowledge that the debate is on the table. Even if the group avoids having to ask for money from the market, rebuilding the balance sheet will be a long task.

With these doubts, the matrix of Iberia It is trading on the edge of 1.9 euros, after failing its attack on the resistance of 2 euros. And it already has relevant support zones nearby.

It is true that such a vertical rise needs a period of consolidation, but the stock has lost some steam compared to the explosive start of the year, although it is still the best airline on the Old Continent.

In addition, it has not taken advantage of the positive news that continues to reach the market, such as the end of practically all restrictions on the United Kingdom.


Repairing the IAG balance sheet could take years

Among the risk factors detected by the economists of Bank of America in IAG, the possibility of asking for money from the market is one of the most frightening. These experts believe that it can be avoided, but they are not so sure that the market thinks the same.

We expect market concerns about a possible capital increase to continue to weigh on stocks given the challenging near-term outlook.

This Thursday, the economists of Bloomberg Intelligence They explained that fixing IAG’s balance sheet without a capital increase is a process that “could take years”, even if there is enough liquidity to avoid the onslaught of the omicron variant.

The pandemic “has left IAG with a large debt and an interest burden that will weigh on profits before taxes”, these experts recalled.

In his opinion, “the airline may not reach an investment-grade credit rating for some time,” especially if the more profitable business travel segment is slow to recover.

Furthermore, “we know that IAG is immersed in the purchase of Air Europa, so the need to increase capital could be on the table, not only to cover its shorter-term costs but also to attend to this operation, which is becoming more and more likely, ”he told finance .com Dario Garcia, XTB analyst.

The recovery of the activity is key for IAG

For now, the group has sufficient liquidity, but everything depends on the rate at which activity recovers. In periods of low demand, with very low income, weekly operating costs exceeded 200 million euros.

If this scenario continues, “measures are likely to be needed to address liquidity by the end of 2022,” they calculated. Bloomberg Intelligence.

The good news is that governments seem increasingly determined to “flu” the coronavirus and permanently lift restrictions.

In the United Kingdom, Boris Johnson It has just announced the end of practically all restrictions, such as masks, teleworking or the Covid passport. Previously, it had already removed restrictions on international travelers.

Along the same lines, France announced the opening of borders for British travelers who are fully vaccinated. These are measures that are reminiscent of the old normality, the catalyst called to boost the tourism sector.

“Positive news since it would highlight the “flu” of Covid-19 and the beginning of the end of the pandemic, which should help the rest of the governments follow in the footsteps of the United Kingdom,” said analysts on Thursday. Sabadell Bank. In his opinion, the removal of restrictions “should boost tourism demand.”

Collection of profits in the 2 euros

Due to technical perspectives, the traffic jam in the 2-euro zone, about which already warned, ended up taking its toll on the price. It is a psychological resistance whose attack has been followed by profit-taking.

“The action has been marking decreasing highs within a bearish channel, which in principle endangers at least reaching 2 euros again,” he said. Dario Garcia.

In the next sessions “it could seek to test support levels again around 1.85 euros, an area that coincides with the average of 200 sessions”, added this expert. From here, this pivot point should allow the stock to regain levels.

The first reasonable objective is to recover the 2 euros and consolidate the advances after the recovery of liquidity levels. This would be the previous step to search for 2.2 euros, a goal that now seems more distant.