Aer Lingus owner IAG dangled the prospect of resuming dividend payments for the first time after the Covid-19 pandemic as soaring travel demand helps repair its balance sheet. Still, that wasn’t good enough for shareholders.
Shares in the airline group, which also includes British Airways and Iberia, slumped as the announcement lacked concrete timing on when payouts will resume, with IAG saying it would reinstate dividends once its balance sheet and investment plans were secure, according to a stock exchange filing.
IAG fell as much as 4.4 per cent, reversing earlier gains of as much as 1.1 per cent. The stock has gained about 26 per cent this year.
“Perhaps the market could have been expecting more near-term commentary rather than medium term,” said Stephen Furlong, an analyst at Davy.
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IAG last paid out a dividend in 2019, and scrapped a planned payout in 2020 at the start of the Covid-19 pandemic. Earlier this month Ryanair said it would pay a dividend of €400 million and plans to hand over about a quarter of annual profit to shareholders.
In a presentation for investors the airline group also mentioned share buybacks and special dividends as ways to give returns to shareholders. IAG set medium-term targets of an operating margin of 12 per cent to 15 per cent and a return on invested capital of 13 per cent to 16 per cent. “We are looking to consolidate the industry but once we’ve looked at the opportunities that are out there for inorganic growth, any excess cash that we have, we will also look to return that back to our shareholders,” chief financial officer Nicholas Cadbury said in a video posted on the company’s website as part of its capital markets day.
The company said in its investor presentation that it would invest €2.5 billion in customer experience over the next three years, and €1.7 billion in IT and digital.
The airline group wants to rebuild its fleet to 2019 levels by 2025, and plans to invest almost €9 billion in fleet replacement and growth. With BA having retired its fleet of 31 Boeing 747s during the pandemic, the company cited a lack of aircraft capacity as a reason for a slower return to 2019 levels of flying amid sluggish deliveries of new jets from manufacturers. – Bloomberg
