The IAG share price makes a flying start to 2023! Should I buy?

At International Consolidated Airlines Group Lowest value from IAG FTSE 100 riser this year. The airline is leading a broad market rally that has pushed the index to a new four-year high.

I am encouraged to see stocks making a positive start to 2023. After all, the past three years have been very sad for longstanding investors after the great stock price crash resulting from the crippling effect of the pandemic on the aviation industry.

So, what is the next destination for IAG shares and should I buy them? Here I am.

International travel recovery

At 140p, IAG’s share price appears to be well below its pre-pandemic high of over 400p. However, there are signs of recovery starting to take place in international travel as passengers return to the skies. This could increase the stock’s upside potential in 2023 and beyond.

Airline stocks are still reeling from the damage caused by Covid-19. Although it has fallen 14% over the past 12 months, IAG shares have fared better FTSE 250 cheap carrier easyJet and Wizz Air. The shares are down 42% and 50%, respectively, compared to a year ago.

Parent company British Airways expects an almost full recovery by the start of this year. Capacity in Q1 2023 is anticipated to reach 95% of pre-Covid levels.

Chief executive Luis Gallego recently highlighted the demand for time off “mainly healthy”, with leisure revenue has made a recovery to 2019 level. Business travel is also catching on, but progress is slower.

The big picture is generally positive. Governments around the world are reevaluating their public health strategies. The strictest quarantine and testing measures are now in the rearview mirror in many parts of the globe.

Risk

However, recovery remains patchy. For example, the Asia-Pacific region continues to lag behind the rest of the world. Indeed, many countries have recently rushed to re-impose restrictions on Chinese travel to limit the spread of the new virus variant after China abandoned its zero-Covid policy ahead of the Lunar New Year period.

In addition, the cost of living crisis could also keep IAG’s share price down this year. As sky-high inflation eats away at household budgets, cost-conscious consumers can forget about exotic long-haul destinations in favor of near-future alternatives. Much of IAG’s success will depend on the macroeconomic backdrop during the crucial summer months.

In addition, the airline also suffers from a net debt burden of €11bn. With interest rates due to rise further, the cost of paying off this debt may increase this year. This can affect the company’s profit margin when starting a tentative recovery.

Should I buy IAG shares?

I think IAG’s share price is improving. I can find many reasons to be bullish as the travel industry continues to return to strength.

However, there are huge risks facing the company and I am not ready to buy the shares. Now, I believe there are better investment options for your spare cash to be found in other UK equities. However, I will be closely monitoring developments affecting the airline throughout the year.