International Airlines Group, the owner of British Airways and Spain's Iberia, is sliding lower after a Morgan Stanley update.
The bank is overall pretty positive on the airline, with an overweight rating on the shares. But it has removed it from its Europe Best Ideas list and prefers budget airlines in the short term. The bank said:
While we prefer IAG on a 12-24 month basis, we are neutral on legacy carriers over the next, relatively catalyst-light, quarter. Near term, our preference in the sector overall is for the low-cost carriers, particularly Ryanair, where we see scope for slight outperformance at 2014 results driving earnings upgrades for 2015.
2014 estimated guidance remains a live catalyst [for IAG}. However, we think only more than €1.3bn earnings before tax and interest and post-exceptionals for 2014 would spur the shares. Unlike Lufthansa and Air France-KLM, IAG has not revealed 2014 earnings guidance. We estimate consensus is around €1,300m, Morgan Stanley €1,391m and we would see a guidance range above €1.3bn as a catalyst for the shares. We do not expect such guidance until 9 May [first quarter earnings report].
IAG shares are currently down 11.2p at 409.4p, the biggest faller in the FTSE 100.
