easyJet and IAG shares are flying, but which should you buy?

first_imgeasyJet and IAG shares are flying, but which should you buy? Roland Head | Wednesday, 12th August, 2020 | More on: EZJ IAG Simply click below to discover how you can take advantage of this. “This Stock Could Be Like Buying Amazon in 1997” See all posts by Roland Head Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Image source: British Airways Our 6 ‘Best Buys Now’ Sharescenter_img Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. The easyJet (LSE: EZJ) share price has risen by 15% over the last week. British Airways owner International Consolidated Airlines Group (LSE: IAG) has gained nearly 20%. However, IAG’s share price is still the bigger loser in 2020, down by 65%.Here’s why I think easyJet is a better buy at the moment. And why I think IAG is a stock to avoid at the moment. 5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…easyJet: Short haul winnerAir travel has been massively disrupted by the coronavirus pandemic. But now that flying has restarted, airlines are delivering quite different results.The strongest recovery so far is in popular short-haul holiday routes. easyJet says that flights to popular European destinations like Faro and Nice were 84% full in July.Bookings for the rest of the summer are “better than expected”, according to easyJet CEO Johan Lundgren. He says that scheduled flights will return to 40% of normal capacity over the next couple of months.easyJet appears to have a clear route back to normal operation. The disruption caused by in-flight hygiene measures such as face masks and reduced cabin service is bearable on a cheap short-haul flight. People want to go on holiday after lockdown.The airline still faces some challenges, but it seems clear to me that easyJet’s business model still works. Its financial situation looks safe enough to me, too. I don’t think easyJet will run out of cash.IAG faces tougher testIAG’s main airline brands are British Airways, Iberia, and Aer Lingus. As flag carriers for the UK, Spain, and Ireland, these airlines run a lot of long-haul flights. The prospects for recovery in this market look much tougher than on short-haul routes.Whereas easyJet hopes to achieve 40% of flying levels by the end of September, IAG is only targeting 26% of its normal schedule, rising to 34% during the final quarter of 2020. I think this is one reason why IAG’s share price is underperforming easyJet’s at the moment.Demand for long haul is heavily dependent on corporate travel. This could be slow to recover. Businesses want to save cash and quarantine restrictions mean that short business trips to many destinations aren’t practical right now.Why I expect the IAG share price to crashBack in June, easyJet acted quickly and raised £419m in a share placing. The level of dilution was fairly low, as the new shares issued represented just 15% of the existing total.IAG has now decided it needs more cash, too. It’s planning to raise a chunky €2.75bn by selling new shares. My sums suggest this is likely to increase IAG’s share count by at least 65%.Worse still, we won’t know how the new shares will be priced until September. I think there’s a good chance investors will demand a big discount to invest fresh cash at this time. If I’m right, we could see IAG’s share count double. In that scenario, anyone who didn’t take part in the fundraising would see their share of the airline’s future profits halved.I expect IAG’s share price to slump when the terms of the fundraising are finalised. For now, I think the situation is just too uncertain. I’d avoid IAG shares until we know more. I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. 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