Qatar Airways increases stake in IAG

Qatar Airways on Wednesday 19 February 2020 made an announcement that it has increased its stake in European Airline holding company IAG (International Consolidated Airlines Group SA). The airline which already was the owner of 21.4 per cent of the airline group would now be holding 25.1 per cent stake in it. In a statement released to the London Stock Exchange by Qatar Airways, its Chief Executive Akbar Al Baker stated that their investment in the European airline group had been highly successful and him and his company continue to support IAG's management and business strategies. The statement did not disclose at what price the acquisition was made but based on the closing price of IAG stock on 18 February 2020, it is being envisaged to be around  £465 million.

IAG was one of those few airline groups in Europe that sailed through the Pre-Brexit tormentuous period without suffering much damage. The company’s revenues continued to swell through the pre-Brexit period with 2018 being an exceptionally good year for the company when its earnings per share grew by nearly 49 per cent and its shareholders earned dividend yields of nearly 9.4 per cent. During the past few years IAG has also made several acquisitions of its own; the company acquired Irish Flagship carrier Aer Lingus for €1.36 billion in January 2015. It acquired Austrian Leisure Airline Niki on 29 December 2017, considered taking over its low-cost competitor group Norwegian in April 2018 but the transaction couldn't materialise. In November 2019 the company announced its intent to acquire Air Europa from Globalia, for consideration of €1 billion.

The success, thus, of IAG makes it one of the most successful investments made by Qatar Airways. It is not surprising that the company has been so much eager to increase its stake in the company. Qatar Airways first made an investment into International Consolidated Airlines Group in 2015 when it bought 9.99 per cent of the company’s shares. Then it increased to nearly 12 per cent in April 2016. It further increased its stake in the company to 15.01 per cent in May 2016 followed by another stake raise to 20.01 per cent on 29 July 2016. Then after nearly three and a half years, the present stake raises to 25.1 per cent. With the current stake raise, Qatar Airways now becomes the largest shareholder in International Consolidated Airlines Group SA (IAG).

Qatar Airways has been making investments in many of the world’s successful airlines. The landscape in Europe is about to change after the United Kingdom's breakaway from the European Union. Several media to large airlines in the past couple of years have shut shop on account of their financial vows exacerbated by the challenging business environment of the Pre-Brexit period. There is now a shortage of airline seats across the European Union. The challenges of Low-cost airlines are also at the highest like it has never been before, who have been for long eating into the margins of full-service airlines. The industry situation in Europe now, thus, will be a race to garner as much market share as possible. The new year is already showing enhanced growth rates in economic activity in the United Kingdom.

Additionally, consolidation in the airline industry will also help it to address many of the future challenges, like the new enhanced regulations of European Union where it is requiring airlines operating in the continent to do more to reduce their carbon footprint. These regulations require large financial outlays and long-term commitments, which only those companies having large scale diversified operations will be able to sustain.

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International Consolidated Airlines Group SA’s stock performance at the London Stock Exchange

Source – Thomson Reuters (five-day price chart)

The stock trading performance of the company from the close on 18 February 2020, after which the news was released, has been strong and during the period till 20 February 2020, the shares of the company have gained GBX 4.20 in share value. On 20 February 2020, the shares of the company were trading on the London Stock Exchange trading at a price of GBX 636.20 at the time of writing of this report.

The shares during the past 52 weeks of trading till date at the London Stock Exchange have touched a 52-week high of GBX 684.00 while also touching a 52-week low of GBX 411.50. The company had, at the time this report was being written on 20 February 2020, a calculated market capitalisation of £12.74 billion on the London Stock Exchange

The average of the stock’s daily traded volume as on the above date and time stood at 1,470,674, and the stock's average daily traded volume for five days was 4,973,466.60; 30 days- 6,985,096.40 and 90 days – 6,560,846.16 and the beta of the stock of the company on the date was 0.79, which compared to the benchmark index reflected a lower volatility and the stock’s daily trading volumes on the London Stock Exchange on an average for five days was down by 28.80 per cent as compared to the 30 days' average daily traded volume, and in last one month, the shares have generated a return of -4.32 per cent and also a return of +2.72 per cent return on year to date basis.

About International Consolidated Airlines Group SA

International Consolidated Airlines Group SA (LON:IAG) is a London Headquartered Airline holding company featuring amongst the world’s largest airline holding companies in the world. The company is the Owner of British Flagship carrier British Airways, Italian flagship carrier Iberia, Aer Lingus, IAG cargo, LEVEL, Level Europe, Vueling and Avios Group. By the end of 2018, the company had 573 aircrafts carrying around 113 million passengers to 268 destinations each year. IAG is a market leader in three European countries, i.e. Ireland, the United Kingdom and Spain which enables it to garner the majority of share in the European aviation market.

The shares of the company are listed on the London Stock Exchange in the Premium Main Market Segment. There they are identified and trade with the ticker name IAG, and also form part of the FTSE 100 index.