Things might finally be looking up for International Consolidated Airlines (LSE: IAG). As Covid-19 restrictions ease around the globe, the owner of British Airways has been getting bullish about its flight schedule. The IAG share price, however, has not looked so cheerful. It peaked early in 2021, but since March it’s been sliding back.
IAG reckons it should operate at around 45% capacity from July to September, compared to its pre-pandemic passenger numbers. And it hopes to get that figure up to 75% by the end of this year. Such predictions are, of course, highly uncertain. Rules on flying seem to be changing almost daily, and the direction of delta variant infections is still very much an unknown.
On the negative side, IAG reported a €2bn loss for the six months to 30 June. And at the time, borrowings had risen 26% over the same point in 2020, to nearly €19.8bn. The company assured us that it still had strong liquidity, amounting to €10.2bn at the halfway stage.
But what does all this say about valuation? My Motley Fool colleague G A Chester has worked out that IAG’s enterprise value today is actually €3.3bn higher than it was before the 2020 crash. I find that quite shocking.
Enthusiasm running out?
Since the IAG share price crash, we’ve seen a number of false starts to its anticipated recovery. Starting back in November, bullish investors have tended to pile in whenever there’s some good-looking news. But the optimism tends to wane as the market then awaits the next snippet of progress.
It looked like the recovery might actually be here in early 2021, after 2020 results spoke of refinancing in an upbeat manner. Successful bond launches shortly after helped push the stock to that March peak. Since then, though, it’s slid 23%. And two quarterly updates have failed to inspire further optimism.
The next update from IAG is not due until 5 November, when we should have Q3 figures. By then, we’ll know a lot more about how the coronavirus battle is going. And the aviation picture should be a lot clearer. I can’t help wondering if that Q3 update could prove to be the pivotal one that July’s Q2 update wasn’t.
Next IAG share price spike?
But what might it take for the IAG share price to start heading upwards before then? Well, August seems to be very much a ‘hold your breath’ month regarding Covid-19 progress. Initial rises immediately after so-called ‘freedom day’ when restrictions were lifted in England led to pessimism. And many were predicting cases to skyrocket. But so far, that’s not been happening.
If we get better figures before the end of the month, I think IAG shares could start on another of their upwards journeys. But to see real sustainable progress, I reckon we might have to wait at least until Q3 time in November. Me? I’m still not taking any chances, and I’m steering clear of such an uncertain business. And that enterprise value thing would keep me away anyway.