The International Consolidated Airlines (LSE: IAG) share price was on what looked like a cracking recovery. But then, in March, the shares dropped by 26%.

And it’s actually a bit worse than that, as IAG shares are now down 29% from the 52-week high of 368.4p set in early February. I saw worse, but that’s relative and might only matter to short-term traders. Though 2025 isn’t off to a great start, the shares are still up 48% over the past 12 months.

Strong 2024 results

With full-year results released on 28 February, CEO Luis Gallego said: “We are particularly pleased to announce that IAG is proposing a final dividend which takes our total dividend for the year to €435m and intend to return up to a further €1bn of excess capital to shareholders in up to 12 months.“

The company saw a 9% rise in revenue, with operating profit before exceptionals up 26%. And it reported €3,556m of free cash flow, after investing €2,816m into the business.

Who wouldn’t be happy with that? Well, the tumbling share price since that day shows the possibly unexpected answer.

As well as 28 February being results day, it’s also the day I saw a quote that will stick with me. It’s from David Dimbleby at the BBC, who said: “I thought the free market was with us forever — then Trump came along.“

Tariff pain

If there’s one economic lesson that politicians have learned from economists, it’s that free trade benefits everyone. And import tariffs hurt everyone. That approach has played a large part in the huge rises in global wealth since the end of World War II.

Some new predictions suggest US inflation could push back up above 5% now. And Goldman Sachs just upped its estimate of the chance of recession to 35%.

International Consolidated Airlines is due to report first-quarter figures on 9 May. Could we see a bit of caution creeping in? Falling demand? Luxuries like air travel are among the first to go when people are feeling the pinch.

Virgin Atlantic has already told us it’s started to see signs of slowing US demand. I fear it might just be the start.

Broker outlook

Deutsche Bank has just reiterated its Buy stance on the stock with a 400p price target. That’s a 53% premium to the price at the time of writing. Some individual targets are higher, though they might be getting a bit stale now.

But Barclays issued a downgrade a couple of weeks ago to Underweight. That seems to be jargon for ‘nah, we think it might go down.’

Someone ignoring the headline hype and just looking at forecasts could see the IAG share price as cheap. Forecasts put the shares on a price-to-earnings (P/E) ratio for the current year at only five. Net debt of €7.5bn takes the edge off that, but it still looks low.

I do think investors could do well to consider the stock at this valuation. And I reckon it’s trade-war fear that’s knocking the share price down now. My take? The airline business is open to just too many risks for me.