IAG shares could slide after trade union threatens strike action

British Airways looks likely to face strike action this Autumn after trade union, Unite, instructed its lawyers to push ahead with industrial and legal proceedings against the airline.

BA owner International Consolidated Airlines Group (IAG) has seen its shares climb 15% in August, but its recent rally could fizzle out amid threats of strike action and coronavirus-related travel restrictions.

‘Enough is enough,’ Unite said in a statement. ‘We will now instruct our legal specialists to proceed to industrial and legal action, which will hit BA in the autumn.’

IAG is trading flat at 189p per share at the time of publication, with the stock 70% year-to-date.

British Airways cabin crew could see pay cut substantially, says trade union

Unite, which represents British Airways cabin crew, claims that the new contracts offered to the airline’s remaining staff did not offer enough stability and could lead to significant cuts in pay.

For strike action to occur, trade union members will first have to approve it via a vote, giving British Airways a few weeks to respond and take steps to avoid a staff revolt. British Airways said on Friday that it has not yet received ‘notification of any ballot for industrial action’.

British Airways is struggling amid the coronavirus pandemic which ended international travel, with European routes subject to significant restrictions aimed at stopping a second wave of infections.

As a consequence, the airline has been spending around £20 million a day and must cut 12,000 jobs to reduce capital expenditure.

‘BA's behaviour is inhumane but it is made worse because it is also needless,’ Oliver Richardson, Unite’s national officer for civil aviation. ‘This business is sitting on billions, built on the hard graft of the very workforce that the airline is hellbent on treating so abysmally.’

IAG shares may struggle ahead of €2.75bn rights issue

Despite IAG shares surging in August, analysts at Davy cut their rating for the stock to ‘neutral’ and issued a target price of 200p ahead of the company’s €2.75 billion rights issue.

In a note to clients, Davy analysts Stephen Furlong and Ross Harvey said that IAG’s upcoming rights issue, which is expected to take place in September, will likely dilute shareholders by at least 50% in exchange of the €2.75 billion the company seeks.

‘We… downgrade IAG to 'neutral' with its highly dilutive rights issue to come in September,’ Furlong and Harvey wrote.

‘The pertinent question for the network airlines, which transfer passengers through large hubs connecting long-haul destinations, is whether they can recover and, if so, how long will this take.’

The path ahead remains challenging for the British Airways owner, with company admitting it will take at least four years to return to pre-crisis passenger levels.

IAG is forecast to record a €2.9 billion operating loss in 2020. The airline group’s outlook in the years ahead is promising, however, with it expecting to generate €620 million profit in 2021, with that figure rising to €2 billion in 2022 and €2.7 billion in 2023.

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