Bankinter | IAG, the parent company of Iberia and British Airways, has paid £557 million (around €673 million) to the British Customs and Revenue service in relation to the VAT claim for flights redeemed in its loyalty programme (IAG Loyalty). The UK requires it to pay a 20% tax rate, regardless of the product being redeemed.
Analysis team opinion: News with little impact because it is not surprising. It coincides with the calculations that IAG had already anticipated. The company reiterates that it is involved in a legal process, through which it is claiming a full refund. It claims that the rate applied varies according to the product redeemed, and in the case of flights, 0% is applied.
We prefer to be cautious and had already included it in our estimates, reducing the company’s valuation by €600 million, so this payment has no impact on our Target Price or valuation. Furthermore, it is not expected to have an impact on the dividend payment for this year: €435 million in cash (dividend yield 2.2%) and €1 billion in a share buyback programme (5.5% market capitalisation).
