Even before the jet fuel crisis that already led to thousands of flight cuts and dealt the final blow to Spirit Airlines, aviation has never been a particularly lucrative industry due to the prohibitive costs of both launching and staying in business.
Since the start of 2026, the shares of “big three” airlines United and American Airlines have been down by 5%. While those of Delta and JetBlue are trading significantly up, almost every carrier both in the U.S. and globally is feeling pressure over high jet fuel costs and a market of wider economic and political uncertainty.
This week, investment giant Morgan Stanley put out a series of moves on its guidance for several European airlines. Downgrading German flag carrier Lufthansa to Underweight on May 26, Morgan Stanley also lowered the airline’s price target from €7.30 to €6.20 just a month after bringing it down from Overweight on April 1.
Morgan Stanley raises recommendation and price target for Air France-KLM
In a separate note to its clients, Morgan Stanley raised its recommendation for Air France-KLM from Market-Weight to Overweight alongside a price target increase from €9.40 to €11.50.
The investment firm cited the airline conglomerate’s recent earnings call and cost-capacity cuts as the reason for its potential growth and “cheap” valuation in comparison to other European peers and Lufthansa in particular.
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The latest moves put Morgan Stanley in the “bullish,” the investing term for expecting the company’s value to rise, category when it comes to the airline holding company that combined the national carriers of France and The Netherlands through a 2004 merger.
Lufthansa, meanwhile, has been the target of multiple downgrades by major investment firms including Barclays and Goldman Sachs. Air France-KLM stock is, at €11.57 as of May 27, largely unmoved since the start of 2026 but up 27% from a year ago.
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Should I invest in Air France stock?: The question for investors is which signal to focus on”
“The sharp three-month share price decline and a five-year total return that is still down more than 50% highlight how quickly sentiment can turn if earnings or demand weaken,” reads an analysis from Simply Wall Street. “While the 1.7x P/E suggests Air France KLM is cheap compared with its earnings, the SWS DCF model indicates a future cash flow value of €48.31 per share versus the current €10.09. That represents a very large implied discount. The question for investors is which signal to focus on.”
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Other factors currently working in Air France-KLM’s favor cited by Morgan Stanley include the recent integration of Bilt in its FlyingBlue loyalty program and slight drops in crude oil prices that will allow it to carry out more of its summer flying schedule.
KLM has been particularly affected by the ongoing situation in the Middle East; since the U.S.-Israeli strike on Iran in February, the Dutch national carrier was forced to cancel over 160 flights to cities such as Doha, Abu Dhabi, Riydah and Amman among others scheduled between May and September 2026.
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