Credit Suisse has reduced its target price for British Airways and Iberia owner International Consolidated Airlines Group, otherwise known as IAG, saying that consensus forecasts for 2013 look 'very vulnerable'.

The market is currently expecting the airline to report a 2012 operating loss in line with company guidance.

However, the broker said that after modelling unhedged jet fuel price exposure at $1,050/mt, its own estimate for underlying earnings before interest and tax (EBIT) in 2013 is reduced from €319m to a level less than half of Reuters consensus of €567m.

"We reduce our target price from 160p to 140p as valuation support dissipates for the stock, and remain 'neutral', however we expect the stock to remain weak in the short term as the market more fully factors in recent jet fuel price appreciation."

Credit Suisse also said that the restructuring of Spanish airline Iberia will take a while as deteriorating domestic demand puts heavy pressure on the its success.

"IAG is firmly focused on restructuring both short/medium and long haul businesses and we expect ultimate success. However, this will take some time in a heavily unionised environment and it remains to be seen whether IB can break even before 2014 in our view, following a likely loss of over €300m in 2012 on our estimates," the broker said.

In spite of strength at British Airways, Credit Suisse reckons that earnings momentum will remain soft in the short term.

By 11:28 on Friday, shares were down 0.45% at 142.46p.

BC

Related share prices
International Consolidated Airlines Group SA (CDI) (IAG) share price