Shares in the owner of British Airways owner soared more than 10pc after the White House said fully-vaccinated travellers from Britain and Europe will be able to travel to the US from November, ending an 18-month ban.
IAG jumped 15.5p to 165p, although that is still considerably lower than the 217p the stock was trading at in April.
Sean Doyle, chief executive of BA, described the move as “an historic moment and one which will provide a huge boost to Global Britain as it emerges from this pandemic”.
The end of the travel ban comes as a major boost to IAG, which relies on transatlantic flights for a significant proportion of its revenue.
It follows an overhaul of the UK’s traffic light system announced last week that will scrap the amber list and end the requirement for double-jabbed passengers to take a PCR test before returning to the UK.
John Strickland, an aviation consultant, said resumption of transatlantic flights would be a far bigger benefit to IAG than a recovery in short-haul travel.
“To now finally get the US to open up and undo the legislation the Trump administration put in place is great news that will allow a further restoration of capacity and a big jump in travel,” he said.
Mr Strickland said BA had been “very nimble” in offering more flights to holiday destinations over the summer to adapt to changing travel habits and the ongoing dearth of business travel.
Leisure trips are likely to make a rapid recovery as people travel to go on holiday or see family and friends, but business travel is expected to take much longer to reach pre-Covid levels.
IAG has previously said it was ready to operate up to 75pc of its 2019 capacity in the final three months of the year, pointing to pent-up demand once travel restrictions eased.
Easing US travel rules may also calm concerns that IAG will be forced to raise fresh capital – a move required by easyJet last week.
Over the weekend IAG chief executive, Luis Gallego, denied the company would need to launch a rights issue. It was discussing options with banks, he told the Sunday Times, and was “always analysing” rivals for takeover opportunities.
The overhaul of travel rules also gave a boost to the wider travel and tourism industry, with shares in easyJet and Wizz Air and Tui all closing higher.
Shares in BA's long-haul rivals such as Air France-KLM and Lufthansa both rose more than 5pc in Paris and Frankfurt.
Julia Simpson of the World Travel and Tourism Council, said: “The prospect of the US lifting travel restrictions to restore transatlantic travel between the UK and US is welcome news – not just for hard-pressed airlines but for the wider travel and tourism sector, which has been decimated by Covid.”Internet Explorer Channel Network