IAG (LON: IAG) share price dipped by more than 1.4% on Wednesday as concerns about the aviation industry resumed. The stock pulled back to a low of 142.56p, which was a few points below this week’s high of 150p. It has declined by over 17.7% from its highest level this year, meaning that it is approaching its bear market.
United Airlines profit warning
The main catalyst for the weak performance of IAG stock was a profit warning by United Airlines Holdings, one of the biggest airlines in the world. In a statement, the company warned that its demand was waning in the first quarter. It now expects that it will lose 60 cents for every dollar it makes. This was a disappointment considering that analysts were expecting the company to make 69 cents.
United Airlines had hinted that it would make $1 per share. However, recent trends have seen the company’s growth slip dramatically. At the same time, its costs, especially pilots pay have jumped sharply, which will affect its profitability.
United is not the only big airline in trouble. For one, other American airlines like American are in negotiations with their unions. And on Tuesday, Southwest Airlines said that its non-fuel costs would increase. It is also spending billions improving its IT systems after the outages it went through in December.
IAG, which owns British Airways and Aer Lingus, has not announced any profit warning. However, investors believe that the company will face similar headwinds that its biggest American peers are going through.
Just three weeks ago, IAG published strong financial results, which saw it swing back to a 431 million euro profit. It had previously lost over 2.9 billion euros in 2021. The company also hinted that its demand was rising.
A key risk for IAG is that competition is rising. Indian airlines are investing billions of dollars to modernize their fleets. And two Saudi Arabian airlines have ordered 80 new Boeing aircraft to grow their international presence.
IAG share price forecast
IAG stock chart by TradingView
IAG stock has been in a strong downward trend in the past few weeks. In this period, the stock has drifted below the 50-day moving average and is supported by the 200-day EMA. It failed to move below this EMA earlier this week. The stock has also moved to the 38.2% Fibonacci Retracement level while the Relative Strength Index (RSI) has continued moving downwards.
Therefore, the stock will likely continue falling as sellers target the key support at 130p. This view will become clear when it moves below the 200-day moving average at 139.50p. The stop-loss of this trade will be at 150p.
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