City investors betting on fall in price of British Airways owner International Airlines Group shares amid fears of air travel chaos this summer
City investors are betting on a fall in the price of International Airlines Group shares amid fears of air travel chaos this summer.
Holiday travel plans were thrown into turmoil last month after thousands of flights were cancelled.
Now British Airways’ parent has been hit by a blitz of short-sellers – traders who borrow shares under contract and make a profit if the price falls.
Under pressure: British Airways’ parent has been hit by a blitz of short-sellers
The number of IAG shares out on loan has soared to its highest for more than a year – more than 10 per cent of the group’s stock, The Mail on Sunday can reveal.
That is double the amount recorded in May and significantly higher than the 1 per cent on loan a year ago, according to S&P Global Market Intelligence. The value of shares held by short-sellers is around £580million.
The activity has coincided with the company’s share price falling to its lowest level in two years. It is the latest headache for IAG after disruption across the group over recent months, including at Aer Lingus, Iberia and Vueling.
BA has been one of the worstaffected airlines due to staff shortages and IT breakdowns. It has been forced to slash its capacity by 10 per cent to cope, despite rising demand.
IAG bosses were quizzed on the rising number of short positions during the company’s shareholder meeting in Spain last week. Chairman Javier Ferran said IAG was not alone in being targeted by short-sellers.
He suggested the increase was down to the sector being hit by the rising price of jet fuel, the war in Ukraine and the uncertain economic outlook globally.
Ferran accepted the figure was ‘higher than usual’, but said the short positions will fall as the industry’s prospects improve.
Analyst Alex Paterson, at investment bank Peel Hunt, said: ‘An instinct for a hedge fund manager when they see very high oil prices is to short airlines because they use a lot of fuel.’
The prospect of strike action at BA is also likely to be scaring off investors, Paterson warned.
He said its long-distance flights could also weigh on costs. ‘The difference between IAG and the other London-listed airlines is that it does long haul. It’s also exposed to Heathrow Airport, where costs have gone up a lot.’
Just over a quarter of shareholders at the meeting failed to back plans to boost the financial rewards of chief executive Luis Gallego.
Despite the investor opposition, Gallego is in line for a pay package of £4.7million if he hits all his targets in 2022.
IAG declined to comment.