British Airways' owner clears path for maiden dividend

In August, IAG revealed that Iberia had finally flown back into the black following two years of painful restructuring, which has claimed more than 4,500 jobs at the Spanish flag carrier. IAG posted a €96m (£75m) pre-tax profit for the six months to June 30, up from a €503m loss at the same point the previous year, after Iberia eked out an operating profit of €16m.

Oliver Sleath, airlines analyst at Barclays, said IAG is targeting a threshold of €1.8m of earnings before interest and taxes (Ebit) before it will have the confidence to pay a dividend.

He said: “I am expecting IAG to articulate a dividend policy at the capital markets day for a well-covered, regular dividend. Timing will be conditional on IAG’s confidence of hitting their €1.8bn target, but it will probably come at some point in 2015.”

Gerald Khoo, analyst at Liberum, is forecasting a dividend of 12 euro cents a share for 2015.

Mr Khoo said: “2015 seems to me to be the most likely financial year when dividends will start, because it ties in with the medium-term targets management set itself (originally in November 2011, but since raised). The underlying principle was that these targets equated to delivering adequate margins and return on capital for shareholders, justifying additional investment but also opening the door to dividend payments.”

easyJet recently raised the proportion of profits after tax that it will pay shareholders through an ordinary dividend, from one third to 40pc, at its own capital markets day. But analysts believe IAG’s dividend policy will involve a far lower percentage, as payments for new aircraft accelerate.

A spokesman for IAG said: “It is our stated objective to get the business to a position by which we can reintroduce and sustain a dividend payment”.

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