The International Consolidated Airlines (LSE:IAG) share price has had quite a turbulent journey so far this year. Despite making solid progress in its recovery from Covid-19, the stock has continued its downward decline. In the last 12 months, it’s fallen by nearly 40%, and since the start of 2022, it’s down by 15%. But is this actually a buying opportunity for my portfolio? Let’s explore.
Hope for the IAG share price
Despite what the stock’s recent performance would suggest, the underlying business has performed admirably, all things considered. Back when Covid-19 reared its ugly head, border closures proved catastrophic for many airline businesses, IAG included. Although the virus continues to create problems, the situation has drastically improved.
In 2021, passenger capacity only reached 36.1% of 2019 levels. However, this seemingly lacklustre performance is somewhat misleading because it’s highly influenced by the low passenger levels at the start of the year. By the end of 2021, the group was operating at 58.3% capacity. And before the Omicron variant entered the picture, its long-haul capacity reached as high as 80%.
What’s more, now that the North Atlantic flight corridor has reopened, management expects transatlantic bookings to return to pre-pandemic levels by mid-2022.
All of this suggests the worst may now be behind IAG and its share price. At least, that’s the impression given when looking at management’s guidance. The group has predicted it can return to profitability by the second quarter of 2022. And that there will be “no further setbacks related to Covid-19 and government-imposed travel restrictions”.
Personally, I think these are ambitious goals, but not unreasonable. And if management successfully hits its targets, then the IAG share price could be set to surge in the coming months.
Taking a step back
As encouraging as these latest figures are, there are still some significant headwinds to consider. Even if Covid-19 no longer poses a threat to this business, there are other forces at work that could impede progress. And inflation is just one of them.
With household budgets about to become tighter, mostly due to rising living costs, family holiday plans could be put on hold. This is a threat rival airliner Ryanair has already highlighted and subsequently plans to offer discounted tickets to entice travellers. No doubt, IAG will do something similar. But any price cuts ultimately mean tighter margins for a company already facing financial pressure.
Time to buy?
My impression of AIG has improved considerably over the last couple of months. With seemingly blue skies ahead, I wouldn’t be surprised to see its share price take off, especially if it returns to profitability. However, there remains a lot of unknown factors that could impede the group’s ability to meet its ambitious 2022 targets. That’s why I’m still not tempted to add this business to my portfolio today.
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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.