International Airlines Group is clearing a flight path towards paying its first dividend since its creation in 2011 through the merger of British Airways and Spain’s Iberia.
The airlines giant, which has also swallowed up bmi and Spanish budget carrier Vueling since its formation, is expected to set out a road map towards its first payout to shareholders at a capital markets day on November 7. Invitations to the event were sent out last week.
Analysts believe shareholders will receive their first payment at the end of IAG’s 2015 financial year at the latest, as a controversial turnaround at Iberia, which sparked strikes and political outcry in Spain, drives an improvement in profits.
In August, IAG revealed that Iberia had finally flown back into the black following two years of painful restructuring, which has claimed more than 4,500 jobs at the Spanish flag carrier. IAG posted a €96m (£75m) pre-tax profit for the six months to June 30, up from a €503m loss at the same point the previous year, after Iberia eked out an operating profit of €16m.
The company said it is on track to improve operating profit this year by “at least” €500m, from €770m in 2013.
Oliver Sleath, airlines analyst at Barclays, said IAG is targeting a threshold of €1.8m of earnings before interest and taxes (Ebit) before it will have the confidence to pay a dividend.
He said: “I am expecting IAG to articulate a dividend policy at the capital markets day for a well-covered, regular dividend. Timing will be conditional on IAG’s confidence of hitting their €1.8bn target, but it will probably come at some point in 2015.”
Gerald Khoo, analyst at Liberum, is forecasting a dividend of 12 euro cents a share for 2015.
Mr Khoo said: “2015 seems to me to be the most likely financial year when dividends will start, because it ties in with the medium-term targets management set itself (originally in November 2011, but since raised). The underlying principle was that these targets equated to delivering adequate margins and return on capital for shareholders, justifying additional investment but also opening the door to dividend payments.”
easyJet recently raised the proportion of profits after tax that it will pay shareholders through an ordinary dividend, from one third to 40pc, at its own capital markets day. But analysts believe IAG’s dividend policy will involve a far lower percentage, as payments for new aircraft accelerate.
A spokesman for IAG said: “It is our stated objective to get the business to a position by which we can reintroduce and sustain a dividend payment”