Credit Suisse sees high potential for IAG's short-haul routes

23rd Oct 2014 15:05

International airline carrier IAG is the most attractive play on business model 'convergence' in its sector Credit Suisse wrote on Thursday.The company has the scope to drive returns by tapping into low cost carrier DNA and successfully challenge the conventional wisdom which holds that legacy carriers cannot operate sustainably profitable short-haul networks, according to the team of analysts led by Neil Glynn.In fact, the analysts estimate that BA's sort haul routes could reach profitability levels approaching those of easyJet thanks to its pricing power.That could see the operator double its operating earnings, in EBIT terms, to reach €2.8bn by 2018."We see it as the most attractive European airline proposition given self-help prospects, its ability to leverage long-haul routes to exceed prior margin peaks, and a highly attractive valuation."Amongst other favourable factors, the Swiss broker highlights the firm will be able to attain double digit free cash flow yields from 2015 onwards.