The IAG (LSE: IAG) share price has had a rough 2021. The stock has been whipsawed by travel restrictions, volatile fuel prices, liquidity concerns and coronavirus waves. But, finally, it looks as if there’s light on the horizon. The lucrative transatlantic travel route will open in November, the UK has scrapped most of its restrictive travel controls, and passenger confidence is returning.
Granted, the market still has a long way to go before it returns to 2019 levels of activity. However, the outlook for British Airways, and the other brands in the IAG portfolio, is now far brighter than it was at the beginning of the year.
As such, I think there’s a substantial chance shares in the airline group can end 2021 on a high note.
IAG share price recovery
Passenger numbers supplied by Heathrow provide some idea as to how the aviation market is recovering from the pandemic. According to the airport operator’s latest figures for September, passenger numbers have recovered to just under 40% of pre-pandemic levels.
This figure simultaneously shows the degree to which the market has recovered so far and how far it still has to go. Indeed, the numbers only go up to the end of September. That was before the travel rules to and from England were relaxed.
Airlines reported a significant increase in the demand for flights immediately after the easing of restrictions was announced. So I think it’s more than likely there will be a considerable uptick in air traffic from October onwards. That’s assuming restrictions don’t make a return.
This can only be good news for the IAG share price.
The company will update the market in the first week of November on its current trading position. Management should also provide some commentary on the state of the aviation industry and the current flight schedule in this update.
If it has been able to significantly increase the number of planes in the sky and the number of passengers in its seats, I think the market will react positively. After all, a higher number of customers should translate into higher revenues and profits. This should justify a higher share price.
Management should also provide some commentary on the outlook for the business over the next few months. If the outlook’s positive, I think the IAG share price should once again react positively. Further updates on the state of the group’s balance sheet, and plans to launch a low-cost subsidiary from Gatwick, should also help improve sentiment.
Risks ahead
Unfortunately, even if management issues an upbeat trading update, the threat of further coronavirus restrictions is ever-present.
What’s more, the company will still have to deal with its sizeable pension obligations and other liabilities, which have stacked up over the past 18 months.
Despite these challenges, I think the outlook for the IAG share price is improving. That’s why I’d buy the stock for my portfolio today as a speculative investment.
Rupert Hargreaves 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.
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