Bank of America Global Research expects International Airlines Group (IAG) to deliver third-quarter profits that top market forecasts, thanks to steady demand on transatlantic routes and ticket prices that are holding up better than expected.
In a preview note ahead of IAG's results on November 6, the bank projected pre-exceptional earnings before interest and taxes (EBIT) of €1,878 million—roughly 2% above the consensus estimate. The upbeat outlook reflects resilient consumer appetite for travel between the US and Europe, as well as competitor pricing that remains firm.
What the numbers show
IAG, the parent company of British Airways, Iberia, and Vueling, has long relied on the North Atlantic as one of its most profitable corridors. According to BofA's analysis, the airline's capacity—measured in available seat kilometers (ASK)—likely rose 1.3% year over year in the third quarter. At the same time, planes remained nearly as full as last year, with an expected load factor of 88.6%.
A load factor measures how many seats are actually filled on flights. An 88.6% figure is high for the industry, indicating that IAG is selling almost all of its seats even as it adds capacity. That combination—more seats and strong occupancy—typically translates into higher revenue.
The bank also noted that transatlantic demand has stayed robust, and pricing from competitors has not weakened enough to force IAG into discounting. That is a key factor because airlines often engage in fare wars on popular routes, which can erode yields even when planes are full.
Why this matters for investors
For everyday investors, the significance here is straightforward: if IAG beats expectations, it could boost the company's share price and signal that the broader airline industry is in better shape than some feared. Airlines are sensitive to economic downturns, fuel costs, and geopolitical disruptions, so a strong quarter from a major carrier like IAG is often seen as a positive indicator for the sector.
However, it's important to remember that an earnings beat is not a guarantee of future performance. Airline profits can be volatile, and factors like fuel prices, currency swings, and labor costs can change quickly. Investors should also consider that IAG's stock may already reflect some of this optimism, as analysts and traders often anticipate strong results.
BofA's forecast is just one view, and actual results could differ. The company's own guidance, management commentary, and outlook for the fourth quarter will be just as important as the headline numbers when results are released.
Broader context
The airline industry has been recovering from the pandemic, but the pace has been uneven. While leisure travel has boomed, business travel has been slower to return, and some carriers have struggled with higher costs. IAG's focus on the transatlantic market, which includes premium cabins favored by business travelers, has been a particular strength.
Other recent earnings reports from the sector have been mixed. For instance, Goldman Sachs posted a strong quarter driven by trading, but that is a different industry. In the energy space, BP expects a significant write-down on low-carbon investments, highlighting how different sectors are facing different headwinds.
For airlines, fuel costs remain a major variable. Oil prices have been volatile, and any spike can squeeze margins. Oil recently jumped to $93.65, which could raise jet fuel expenses in the coming months. So far, IAG has managed to offset some of these pressures through pricing power, but that may not last if fuel costs keep climbing.
What to watch next
When IAG reports on November 6, investors will be looking at several key metrics: revenue per available seat kilometer (RASK), which measures unit revenue; cost per available seat kilometer (CASK), which tracks unit costs; and management's outlook for the crucial fourth quarter, which includes the holiday travel season.
Any commentary on forward bookings, especially for the winter and spring, will also be closely scrutinized. If IAG indicates that demand is softening, that could offset the positive third-quarter numbers. Conversely, if the company raises guidance, it could lift the entire European airline sector.
For now, BofA's note adds to the growing sense that IAG is navigating a challenging environment better than many of its peers. But as with any investment, it's wise to keep an eye on the bigger picture and not overreact to a single analyst's forecast.
