IAG may soon announce plans for a “sizeable” share buyback, according to analysts at Morgan Stanley.

“An off-market buyback is IAG’s preferred capital return mechanism,” the analysts say in a research note. “While not currently in our base case, we think a $600 million share buyback program in September is possible.”

Morgan Stanley says the potential top-up of IAG’s SBI India joint venture stake from 26% to 49% may affect the size of a buyback, but the company is likely to first consolidate its positions in profitable markets such as Malaysia.

A buyback could add 1.6% to earnings per share in the current financial year, but upside would be diluted by lost investment earnings on the $600 million, the analysts say.