Market Analysis: IAG & BoohooFollowing IAG's Q1 results announcement Jack Winchester, Analyst at Third Bridge, said:
“IAG’s seating capacity over the last three months was just one fifth of 2019 levels, and it expects to increase that to 25% of 2019 levels in Q2. This will increase cash costs per week from 175 million Euros to 200 million Euros.”
“The two big questions for IAG are when will the world start flying again, and how soon can business travel recover. Consensus estimates predict IAG’s revenues won’t reach 2019 levels again until 2026 and business travel is likely to be depressed for even longer.”
“IAG’s fortunes are especially tied to a very profitable US-UK business travel market and this is going to suffer so long as cash conscious companies make Zoom calls central to how they do business.”
“In the shorter term, a lot will hinge on what the UK government deems as appropriate ‘traffic light’ designations in key markets such as Spain.”
“There is also the issue of Covid-19 testing with our experts noting many consumers want to get back on planes but feel deterred by exorbitant Covid-19 testing costs.”
“British Airways is offering discounted tests for £33 in an effort to tempt more passengers to fly again, but this discount effectively comes out of IAG’s pocket.”
“While IAG’s revenues for the past three months came in below expectations, it is clear that the airline has had no difficulty raising cash from investors. Including a 1.2 billion Euro bond issuance which was heavily subscribed, the company raised almost six billion Euros in the first quarter of the year.”
Commenting on Boohoo, Harry Barnick , Senior Analyst at Third Bridge, said:
"Boohoo has been a clear lockdown beneficiary thanks to its ubiquitous online presence and agile supply chain arrangements."
“Boohoo's FY21 sales accelerated 41% as Covid kept bricks and mortar competitors closed and rewarded online fashion giants able to pivot from party dresses to pyjamas."
"Boohoo's supply chain has been a defining characteristic of the company over the last 12 months. It is both a strength, allowing Boohoo to quickly hoover up the latest TikTok styles, and a weakness, causing brand damage due to controversy around working conditions in the UK and abroad."
"Boohoo now has the complex job of cleaning up its global manufacturing practises whilst ensuring it retains its competitive edge as the fastest and cheapest player in the market. It will need to be whiter than white in the medium-term if it is to avoid being permanently sullied by questions around its operations."
"As lockdown eases in the UK, Boohoo could benefit from a resurgence in 'going out' clothing categories, with younger customers flocking to festival wear and summer staples."
Third Bridge is a global primary research firm that interviews more than 6,000 internationally recognised industry experts and business leaders a year to compile 360-degree market intelligence for institutional investors. www.thirdbridge.com