IAG share price outlook as return to profitability nears

The IAG (LON: IAG) share price collapsed by more than 10% on Friday after the company published mixed quarterly results. The stock declined to a low of 125p, which was the lowest level since March 9 this year. It has crashed from the April high of 155p. 

British Airways parent sees slow growth

IAG is the parent company of British Airways and Aer Lingus. It is one of the biggest airline groups with a market cap of over 6.5 billion pounds.

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In a statement on Friday, the company said that its business continued doing well in the first quarter although challenges remain. For example, the firm said that its passenger capacity in the first quarter was 65% of the capacity in 2019. This was a slight improvement from 58% in the previous quarter. It expects to push this to 80% of total capacity.

The company also said that it had observed a strong demand from business travelers, who are important to its business. Still, the company is still in a loss-making territory as the total operating loss came in at 731 million euros. Its loss after tax and other exceptional items rose to 787 million euros. The management expects that the firm will be profitable in the second quarter.

Further results revealed that the company had boosted its balance sheet, with its cash on hand being 8.1 billion. This was about 241 million euros above its previous quarter as bookings rose. In a statement, the CEO said:

“Premium leisure continues to be the strongest performing segment and business travel is at its highest level since the start of the pandemic.”

The IAG share price also declined as the impact of fuel costs rose. The company’s cost of fuel in the three months to March rose to 918 million euros from the previous quarter’s 226 million euros.

IAG share price forecast

The four-hour chart shows that the IAG stock price has been in a narrow range recently. The stock has managed to move below the lower side of the ascending channel which is shown in purple. It has also moved below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved to the oversold level.

Therefore, there is a likelihood that the stock will continue falling as bears target the key support level at 110p. A move above the resistance level at 135p will invalidate the bearish outlook.

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