International Consolidated Airlines Group (IAG) reported impressive interim earnings for the first half of 2024, exceeding expectations, while also announcing the termination of its second attempt to acquire Spanish airline Air Europa. This significant development marks a pivotal moment for the airline holding company, as the news came just after trading closed in London, revealing that IAG’s stock had dropped nearly 4%.
The main highlight of the announcement was undoubtedly the cessation of the group's efforts to purchase Air Europa, a move that met resistance from regulatory authorities. Bernstein analyst Alex Irving commented that although the acquisition appeared highly beneficial, potentially enhancing earnings per share (EPS) significantly, investors did not seem to factor in a premium for the deal's approval.
Initially, IAG had signed an agreement for an 80% stake in Air Europa back in February 2023, but the European Commission took notice of the deal in early 2024, prompting a regulatory review that ultimately led to the termination. A deadline for a decision was established for August 20, 2024. This was not the first attempt for IAG; back in 2021, the company unsuccessfully tried to acquire Air Europa, of which it currently holds a 20% stake.
Following the cancellation, IAG will pay a 50 million-euro break fee to Globalia. On a brighter note, the company reported that revenue surged to 14.72 billion euros in the first half of the year, an increase from 13.58 billion euros, while net profit saw a slight decline, reaching 905 million euros compared to 921 million euros.
These results were notably above the expectations set by analysts at Visible Alpha. Additionally, IAG's board declared an interim dividend of 0.03 euros, a significant move as it's the first time the company has issued a dividend since the COVID-19 pandemic forced it to halt payouts four years ago.
Looking forward, there is a possibility of another dividend in the third quarter. Luis Gallego, the Chief Executive Officer of IAG, expressed optimism about the airline's robust performance, stating, 'We see continuing strong demand for travel in the attractive core markets in which we operate: North Atlantic, Latin America and intra-Europe.
We delivered a good performance in the first half of 2024. We are pleased to announce a return to paying a dividend, which reflects our confidence in the business, our performance and our transformation. We are delivering on our strategy and our commitment to sustainable shareholder returns.'.