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Investing.com - Morgan Stanley initiated coverage on International Consolidated Airlines Group SA (LSE:IAG) (OTC:ICAGY) with an Overweight rating and a price target of GBP5.50 on Wednesday.
The investment bank highlighted IAG’s dominant position at London Heathrow, where it controls over half the slots, providing access to what it described as the world’s largest premium and corporate travel hub. This advantage has supported resilient premium demand, helping offset softer U.S. leisure travel trends.
Morgan Stanley expects IAG to expand its share in the profitable transatlantic market, with limited competition at Heathrow sustaining pricing power. The firm noted that cost transformation efforts, new-generation aircraft like the A321XLR, and customer experience reinvestment are expected to further improve margins.
The bank views consensus expectations for FY25 EBIT as conservative, citing potential upside from stronger pricing, lower fuel costs, and better unit cost performance. Morgan Stanley’s EBIT estimate is 6% above consensus for both 3Q25 and FY25.
Beyond 2025, Morgan Stanley expects fleet renewal and digital initiatives to reduce costs and support strong margins and returns on capital, while robust cash generation, a solid balance sheet and enhanced shareholder returns could lead IAG shares to rerate above historical averages.
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