Why IAG share price recovery can still take a long time

International Consolidated Airlines (LSE: IAG) has made impressive recovery since the outbreak. IAG share prices had a strong start in 2021, but have been declining again since the spring. Still, we are looking at a healthy 12-month profit of 60% as the market closes on Tuesday.

But I thought for a while that the recovery was probably a bit premature, and might not be sustainable. Does the current assessment reflect a very pink outlook for international air travel? A snippet of the news reinforces this question.

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We want to see that the owner of British Airways is getting the passenger volume and profit back to the 2019 level as soon as possible. The longer it takes, I think investors will lose patience. And that could be a long-term reason for the IAG share price to go nowhere.

Boeing It has previously been suggested that air travel will not return to normal until late 2023 or even early 2024. I think now that it can be very optimistic. International Consolidated, with its long-distance focus, may be on the verge of returning to the skies, allowing short-haul airlines to recover more quickly.

September figures from London’s Heathrow Airport show that passenger numbers have dropped to 40% off pre-epidemic levels, which didn’t seem like a bad start at the time. But now, the airport boss, John Holland-Kaye, has told the BBC that we still have about 45% of the 2019 volume.

Will not recover until 2026?

He further warned that we will not see a complete recovery of air traffic until 2026. Holland-Kay’s frustration comes at a time when Heathrow is being denied permission to raise charges as he pleases. But it is becoming increasingly clear that our return to the sky requires more than just people who want to fly.

After two summers stay at home without having to travel to the beach and for wine, potential demand appears there. But the entire infrastructure supporting the industry has been severely damaged. Supply chain problems, staff shortages and other structural hurdles are all getting in the way.

Heathrow, of course, is only an airport. But being the main hub of British Airways, it is a rather important one. So what does all this IAG mean for the share price?

IAG share price outlook

We have Q3 results on November 5, although I don’t expect them to be very explosive For the second quarter, IAG saw passenger numbers reported at about 22% of the 2019 level. But that was before travel bans were relaxed.

At the time, the company told us they would see about 45% of Q3 passenger numbers in 2019. If it can do better than that, the shares could rise further. But if the traffic is low, more can join me to disbelieve the optimism of 2021.

Now, I could be wrong here, and we see further growth. If the booking seems to be doing well, my fear might go out the window. After all, I am the most bearish investor in airlines. But at the moment, I don’t see enough security margins on the price of IAG shares to add stock to my portfolio.

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Alan Oscroft has no position on any of the shares mentioned. Motley Flower UK has no position on any of the shares mentioned. Opinions about the companies mentioned in this article may differ from those of the author and therefore our official recommendations for subscription services such as Share Advisor, Hidden Winner and Pro. Here at The Motley Fool we believe that considering different range of insights makes us a better investor.

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