Broker snap: IAG cleared for take-off

25th Jan 2011 11:57

On just its second day of trading, the newly-formed International Airlines Group (IAG) has received a positive rating by Nomura, as it sees the holding company as a medium-term winner despite some near-term concerns.IAG was formed by the merger of two airlines - Spain's Iberia and the UK's British Airways (BA) - and began trading on Monday, ranked as the third-largest airline in the world. "IAG will be a dominant carrier on the Atlantic routes with the number-one market share on routes to both the North and Latin America," says analyst Andrew Evans, who expects the combination of BA and Iberia to create €400m of synergy benefits over a five-year period.The Japanese broker says that Iberia's cash position combines well with BA's fleet ownership, but it has concerns about the "ability of the airlines to pass on the high fuel price given higher near-term long-haul capacity growth and tough year-on-year yield comparisons."However, Nomura has set its IAG numbers to build the margin progressively, with upside potential from higher synergies over time. A 'buy' rating and 355p target price are confirmed.