IAG better placed than European flag carrier rivals, says UBS

19th Jun 2014 12:12

British Airways and Iberia owner International Airlines Group (IAG) is better placed than European rivals to lift profits, according to broker UBS.UBS said it preferred IAG to the other flag carriers it covers, which include the likes of Air France-KLM and Deutsche Lufthansa.IAG, which has launched job cuts and a productivity drive at its struggling Spanish arm Iberia, is further down the restructuring road than its French and German counterparts, the broker said.Competition from budget airlines is more mature in Spain and the UK than in other European countries and IAG is more able to cope with it.Finally, IAG faces less pressure from Gulf carriers such as Emirates, Qatar Airways and Etihad because the Asian market, which they are targeting, is a relatively small part of IAG's business.UBS said IAG's second quarter results on August 1st were likely to reassure investors and could boost its shares.The broker believes IAG could make €2bn of operating profit in 2015, rather than the company's own forecast of €1.8bn."Furthermore, we do not think 2015 will be peak profits for IAG," UBS said.UBS has a 'buy' recommendation and 495p price target on IAG.It downgraded Air France-KLM from 'neutral' to 'sell', saying the French and Dutch group was facing issues including currency volatility in the Latin American market, competition from European budget carriers in France and excess industry capacity on some routes.UBS is advising investors to buy Lufthansa shares, but said: "Following last week's profit warning, a number of 'unanswered' questions has once again risen and the timing of answers to all the questions is uncertain." Shares in IAG rose 0.7p or 0.2% to 377.6p at 13:01 in London. Shares in Air France-KLM fell €0.25 to €9.90 in Paris and Deutsche Lufthansa was €0.13 down at €15.81 in Frankfurt.PW