Airline shares don’t usually come close to doubling in a month. But that’s what’s happened to International Consolidated Airlines (LSE: IAG). Since its lowest point on 30 October, the IAG share price is up a fraction over 85%.
It’s all down to developments on the Covid-19 vaccine front. We now have three vaccines that have produced very impressive results in trials. And the most recent, the Oxford vaccine developed in partnership with AstraZeneca, is far cheaper and easier to transport and store than the others. That raises hopes of a faster rate of worldwide vaccination, which can only help the plight of the airlines.
But before I get too excited about prospects for the IAG share price, I’m keeping three key things in mind. Firstly, we might see the first vaccinations happening even before the end of the year. But we could have to wait some time before vaccine reaches enough of the population to really benefit the airlines. I don’t expect passenger numbers to start to climb noticeably higher before next summer at the earliest.
IAG share price in 2020
Next up, the IAG share price itself. Sure, we’ve just seen a cracking month’s gain. But that just means the disaster of 2020 is now a tiny bit less of a disaster. We’re still looking at a 73% fall since the beginning of the year. So if I buy now, will I be buying into one of the best performing shares of the month, or one of the worst of the year. For me, it’s the longer-term trend that matters.
But my biggest concern when I think about IAG is, which IAG? Not the IAG we had in January 2020. No, that IAG has gone. And before anyone contests that, let me explain what I mean. When a company’s market fundamentally changes, possibly permanently, and when its corporate and financial structure turn upside down, we should forget what it used to be like and evaluate it as a completely new company. And as yet, I have no idea what shape that new company will be. Or where the IAG share price will go.
The shape of IAG to come
This was brought home to me by a BBC News story talking about a big sell-off at British Airways. It’s not just a cash-generating asset disposal of the kind we often see at times like this. No, BA is selling off cutlery and crockery, including bone china from first class cabins. Some of it is Boeing 747 paraphernalia now those are out of service, and people love souvenirs. And it makes sense for IAG to generate as much cash as it can, especially after recording a £5.1bn loss for the first nine months of the year. Ouch. Remembering that figure makes me twitchy about the IAG share price.
But the BBC made the point that BA is likely to be a significantly slimmer operation until the aviation business picks up. I don’t think that pick-up will happen for quite some time. And I think we might never again see flying regain its pre-pandemic levels.
So until I see the shape of the industry, and the shape of the company, the IAG share price can do what it likes. I’m not buying.