The International Consolidated Airlines (LSE:IAG) share price had some substantial growth before the pandemic. This is mainly attributable to the firm’s high liquidity levels, which proved essential during the pandemic. But in early 2020, like most other airline businesses, the IAG share price fell off a cliff, falling by 66% within a week. Things have since improved. And year-to-date, the stock has bounced back by just over 45%. 

However, now that the delta-variant of Covid-19 is causing rising infection rates can the company maintain its recent upward momentum? And should I should be adding this business to my portfolio? Let’s take a look.

IAG’s share price opportunity from easing lockdown restrictions

In the first quarter of 2021, the company achieved a passenger capacity of around 19% compared to pre-pandemic levels. The low percentage was due to coronavirus restrictions imposed by international travel restrictions.

But recently, the UK government lifted all lockdown restrictions as well as eased travel limitations for individuals. After more than a year in confinement, the demand for a long-overdue holiday has skyrocketed. Needless to say, this is fantastic news for the business. If more individuals travel abroad, IAG should have no problem finding more travel to fill its empty seats. And so, I would expect to see aircraft capacity increase in the next earnings report, along with revenue and the IAG share price.

The risks that lie ahead

Even though the skies seem clear for the IAG share price to recover, there remain quite a few concerning hurdles to overcome. At the start of the pandemic, the sudden need for cash forced the management team to raise capital quickly. Consequently, the level of debt increased substantially. While the business has begun paying down these loans, they still stand at around €15.6bn as of December 2020.

Even if IAG can return to pre-pandemic levels of profitability, most of these profits will likely be used to cover interest payments and bring the overall debt level to more manageable levels. If that’s the case, I wouldn’t expect its dividend payments to resume for a while as well.

Something else that is causing a rise in uncertainty is the effects of the delta-variant of Covid-19. It’s causing the infection rates to rise once again. And if lockdown restrictions are re-introduced to combat this, the IAG share price is likely to be adversely impacted. 

Conclusion 

IAG seems to be taking full advantage of easing travel restrictions, which is quite encouraging and has helped boost its share price. However, as encouraging as this progress has been, the business is far from making a complete recovery. Personally, I think there are better investment opportunities to be found elsewhere. Therefore I’m keeping IAG on my watchlist for now.

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