IAG share price has crawled back in the past six consecutive days as investors bought the dip following a 25% dip earlier this month. The stock was trading at 300p on Thursday as UK stocks stabilized following the Federal Reserve decision.
Airline stocks have lost momentum
The recent IAG share price performance mirrors that of other global airline companies that thrived in 2024. United Airlines has collapsed by over 35% from its highest level this year, meaning that it is in a deep bear market.
Similarly, American Airlines share price has dropped by over 40%, while Delta has plummeted by over 31%. The closely watched US Global JETS ETF (JETS), which tracks the biggest airline companies, has plunged by almost 18% from the year-to-date high.
IAG and other airline companies surged in 2024 as the industry stabilized and reported results that were stronger than expected. These companies are also changing their businesses to target wealthier customers and boost margins. One of the top approaches for this is to launch premium economy and other expensive seats.
IAG reported strong numbers
The most recent results showed that the IAG business continued doing well last year, helped by its lucrative transatlantic route.
Its annual revenue rose by 9% last year to €32.1 billion, while the operating profit surged by 22% to €4.2 billion. The profit after tax was €2.7 billion, making it one of the most profitable airlines in the industry.
Most of this growth was mostly driven by its investment in British Airways. It has invested over 7 billion pounds in the company in the past few years in a bid to position it as a better alternative to companies like Delta and United.
IAG’s growth was also because of capacity, which included a 6% boost in 2024. The management hopes to continue growing the capacity from Europe to North America and to Latin America.
IAG expects that the business will continue doing well this year. It sees its revenue and margins continuing to rise.
As a result, the company is improving its balance sheet, which has seen its net debt to EBITDA move to 1.1x, lower than 1.7x a year earlier. It hopes to continue making these improvements, by purchasing its debt.
IAG share price may benefit from its capital returns strategy. It paid €435 million in dividends last year and hopes to pay €1 billion more this year.
Read more: IAG share price has surged: will it fly or sink in 2025?
Therefore, the IAG share price has dropped because airline stocks are highly cyclical with regular pumps and dumps.
IAG share price analysis
IAG stock chart by TradingView
The weekly chart shows that the IAG stock price has hit turbulence in the past few weeks. It crashed from a high of 367p in January to a low of 274p. This decline saw it move below the 23.6% Fibonacci Retracement point. Therefore, the ongoing pump is a sign that investors are simply buying the dip.
The most likely scenario is where the IAG share price resumes the downtrend and retests the crucial support at 236p, the highest swing in June 2020. It may also drop to the 50% retracement point at 228p and then resume the uptrend.
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