JPM flags positive outlook for British Airways-owner IAG

(Sharecast News) - JP Morgan has flagged IAG as one of its top picks across Europe's airlines, while reiterating its 'underweight' view of German rival Deutsche Lufthansa. In its latest review of the sector, published on Monday, the Wall Street bank said it had put the British-Spanish owner of British Airways, Iberia and Aer Lingus on 'positive catalyst watch' into the second half.

In contrast, Lufthansa was put on 'negative catalyst watch'.

It said: "We see the potential for continued pricing outperformance leading to consensus upgrades at IAG, and to the contrary at Lufthansa. This is driven by three transatlantic drivers."

It argued that the most constrained market capacity was at IAG's core markets, with weighted volume growth to and from the US currently positive. However, it found weighted volume growth negative for Lufthansa and Air France-KLM.

JPM continued: "Premium demand commentary remains good for the Euro-US airlines and we estimate IAG has the highest premium seat penetration on the transatlantic.

"Although the buy-side are broadly positive already on IAG and negative on Lufthansa and Air France-KLM, we see potential for the year-to-date performance to diverge from here.

"We increase our 2025 earnings before interest and tax estimates on IAG by 3% on lower fuel/slightly better unit revenues, and sit around 6% above Bloomberg consensus.

"We decrease our 2025 EBIT estimates on Lufthansa by 3% on slightly lower unit revenues, and sit around 9% below consensus."

As well as being 'underweight' on Lufthansa, JPM is 'overweight' on IAG and 'neutral' on Air France-KLM.

As at noon BST, IAG's London shares were trading 1% higher at 372.5p, while Lufthansa was 1% lower and Air France-KLM was off 2%.