DAVY VIEW

IAG has confirmed its cash flow, margins and returns targets ahead of its 2016 Capital Markets Day this morning. Importantly, it has reinforced its strong equity free cash flow targets, and the statement that the balance sheet requires no further deleveraging charts a path towards shareholder-friendly distributions. We note the significant reduction in capex (averaging €1.7bn per annum versus less than €2.5bn previously). IAG remains the stand-out network airline group investment, mirroring the returns focus of US peers (such as Delta). We maintain our ‘Outperform’ rating.