IAG (IAGLN; Ba2 Pos. CW, BBB- S) 1Q Earnings Call

IAG 27/29s unch-to-tighter on in-line earnings while Lufthansa's curve is marked +3-6bps wider on its 6Y mandate - LHA moves tad surprising given supply should have been expected (refi).

IAG earnings call comments below - all look in-line. We are not sure what's going on with the 27s (well tight after a -70bp move in this year). NIC/steep curve pricing on the new Lufty 30s could be motivation to step out of the IAG 29s - no signs of that this morning (29s -3 in). Moody's saw gross leverage moving from 2.7x to 2.5x this year - gross is unch this qtr/needs to pay down debt noting EBITDA won't help leverage cycle significantly lower this year. Already in upgrade territory for Ba1 ratings but we see it remaining crossover for now.

• Mgmt asked about the consensus EBIT for Q2 at €1.1b (-10%yoy) - it didn't do much to refute upcoming weakness - pointing to Easter timing (benefited it this qtr), capacity coming on board & cycling strong Q2 comps from last year.
• Clarified despite +3.7%yoy increase in non-fuel unit costs this qtr, sees FY up only slightly yoy (unch guidance from March/FY23) as it rolls through the easier comps (pay deals kicked in Q2 and Q3 last year).
• On business traffic; slow recovery (timing of Easter headwind in March). BA volumes were up 5%yoy, Iberia similar situation - still seems to indicate BA business lagging Iberia (85% recovered vs. 70% in BA). Maintain objective to come back to 85% in volume but might take longer.
• Was asked about BA EBIT recovery (FY23 at sterling1.4b vs. 2019 level of 1.9b) - said sees it there in coming year or 2 - consensus in-line/has by FY25.
• Not much colour on how much of WC/summer booking seasonal benefits this quarter would hold on leverage - does expect a fall yoy (2.1x last year). Not much colour given on dividend restart.
• Supply this year looks unlikely - front maturity is the €500m March 25's.