IAG (LSE:IAG) still earns more operating profit on each euro of sales than Air France-KLM or Lufthansa, a gap analysts at Panmure Liberum believe the shares undervalue.
The broker, in a note on Monday, kept its Buy rating and 620p price target after the British Airways owner missed third-quarter profit expectations last week.
Operating profit fell 16% to €1.73 billion in the three months to September, €84 million below consensus, as the fuel bill climbed €570 million to €2.44 billion. Both rivals grew profits, but IAG’s operating margin of 17.7% remained ahead of Air France-KLM’s 13.6% and Lufthansa’s 11.5%, according to the broker.
Stronger revenue per seat kilometre on long-haul routes absorbed some of the fuel increase, while competition put pressure on short-haul routes.
Non-fuel costs also came in €119 million above Panmure Liberum’s forecast, with engineering and other aircraft costs accounting for most of the difference.
The broker sees some risk to full-year earnings forecasts after IAG raised its fuel cost estimate by €300 million and said non-fuel unit costs would rise 1%, against its previous expectation of no change.
IAG kept its full-year operating margin guidance at 12% or more and is due to report annual results in February 2027.
In London, IAG shares traded up 3.25% on Monday changing hands at 447.8p.
