IAG shares

IAG, the owner of British Airways saw shares climb after Moody’s upgraded the carrier’s rating because of improved earnings.

IAG Logo

IAG Logo

British Airways had its Moody’s rating upgraded by one level from B1 to Ba3, marking the company as less of a credit risk, after posting strong first quarter profits on Friday.

Moody’s said the rating reflected British Airway’s strong performance in 2013, when the carrier’s revenue rose 5.5pc to £11.4bn.

“We are upgrading BA’s ratings mainly because of materially improved earnings in 2013 as well as our expectation of further improvements over the next two years”, said Sven Reinke, a Moody’s vice president senior analyst.

But, Moody’s said the weak performance of IAG’s Spanish airline, Iberia, affected the rating.

“While we continue to assess BA on a standalone basis, we nevertheless take into consideration the weaker operating performance at Iberia compared with BA’s performance.

“While we recognize the legal separation of the two entities, we will continue to assess the ongoing restructuring initiatives at Iberia and the extent to which these could, over time, impact BA’s own financial profile, if at all”, said Mr Reinke.

On Friday, IAG said Iberia had almost halved its operating losses in the first three months of the year to 111m euros (£90.4m), down from 202m euros (£165m) during the same period in 2013.

International Airlines Group which owns British Airways and Iberia slid lower after a Morgan Stanley update.

IAG Logo

IAG Logo

Morgan Stanley is, overall, fairly positive on the group with an overweight rating on the shares. But it removed IAG from its Europe Best Ideas list, preferring budget airlines in the short term.

Morgan Stanley expects low cost carriers such as Ryanair to outperform IAG in the near term.