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British Airways shuttle service from Heathrow landing at Manchester Airport. Photo: Christopher Thomond.
British Airways could see brighter times ahead. Photo: Christopher Thomond.
British Airways could see brighter times ahead. Photo: Christopher Thomond.

British Airways owner IAG leads FTSE 100 higher

This article is more than 9 years old

Hopes of boost from short haul business lifts airline, but Tesco and Unilever weigh on markets

Fears about Ebola hitting the travel industry have unerved airline companies in recent times, but British Airways owner International Airlines Group has recovered some lost ground as worries about the virus spreading have eased.

Added to that, another catalyst for a 12.8p rise to 384p was a positive note from analysts at Credit Suisse, who added the company to its focus list, based on the prospects for its short haul business.

The bank said:

Our new proprietary analysis suggests BA’s loss-making short haul business can approach easyJet profitability levels via cost savings that pricing power delivers to the bottom line. We outline our roadmap for IAG to double earnings to €2.8bn EBIT by 2018 and see it as the most attractive European airline value proposition given self-help prospects, BA’s scope to leverage a full London Heathrow to exceed prior margin peaks, and a highly attractive valuation, with 67% upside potential to our new target price of 618p (from 587p).

Overall the FTSE 100 finished 19.42 points lower at 6419.15, helped by an opening surge on Wall Street as positive US company news outweighed worries about the global economic slowdown. Alastair McCaig , market analyst at IG, said:

Caterpillar has given some tangible credence to the notion that the US recovery is still on track with its better-than-expected figures and improving outlook. Of the major US companies to have reported so far, over 70% have beaten market expectations and US traders will be hoping for more of the same as they wait for both Amazon and Microsoft to post after today’s close. Slightly denting the good corporate picture being created in the US have been today’s US economic data releases. Rising unemployment claims along with weaker-than-expected flash manufacturing figures have only slightly taken the shine off rises in all three of the major US equity indices.

UK corporate news was not so positive, with Tesco inevitably under the cosh again after a higher than expected black hole in its accounts and a strategy free update. Its shares fell 12p to 171p while rivals also fell back on concerns about their progress against the discounters Lidl and Aldi. J Sainsbury slid 4.4p to 237.2p and Morrisons lost 4.8p to 153.1p.

Unilever also disappointed the market with its figures, falling 94p to £24.40 while Tullow Oil lost 22p to 505.5p after a disappointing update from Kenya drilling.

Smiths Group dipped 23p to £11.59 as its shares went ex-dividend, while BAE Systems fell 5.6p to 443.7p for a similar reason.

Finally, Fitbug jumped another 58% to 2.575p following Wednesday’s news of a deal to sell its fitness devices in Sainsbury and US retailer Target.

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