IAG's 'buy' rating reiterated but target price cut by UBS

UBS said the owner of British Airways faces a number of challenges in a post-Brexit environment.

“Although IAG consists of four operating companies of which three are based outside the UK, there remains an issue of how the UK's regulatory relationship with the EU will now evolve,” said UBS analyst Jarrod Castle.

“This is because the relationship between the EU and UK will have to be renegotiated as it pertains to aviation should the UK not remain part of the ECAA.”

While the situation is unclear for British Airways, UBS said it was confident a workable regulatory environment can be established. The bank also believes the challenges IAG faces could present an opportunity.

“Indeed management has often spoken about the flexibility in the business and now we think it is time for them to prove this will be the case.”

UBS reiterated a ‘buy’ rating on the stock, saying IAG is the “best-of-breed European flag carrier” with management in the past displaying an ability to drive out costs from the organisation.

Shares dipped 1.86% to 374p at 1051 BST.