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 the “big three” airlines, United and American Airlines, have fallen by about 5%. While Delta and JetBlue’s stock prices are trading significantly higher, almost every carrier, both in the U.S. and globally, is feeling pressure from high jet fuel costs and a broader economic and political landscape of uncertainty.
As a result, this week, investment giant Morgan Stanley issued a series of updates to its guidance for several European airlines, including 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 resets recommendation and price target for Air France-KLM
In a separate note to clients, Morgan Stanley raised its recommendation for Air France-KLM from Market-Weight to Overweight and increased its price target to €11.50 from €9.40
The investment firm cited the airline conglomerate’s recent earnings call and cost-capacity cuts as reasons for its potential profit growth. It also called out the stock’s “cheap” valuation compared to other European peers, including Lufthansa in particular.
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The latest moves put Morgan Stanley firmly in the “bullish” camp 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.
Air France and KLM became a combined airline holdings company in 2004.Shutterstock Should I invest in Air France stock?
Air France-KLM’s stock price in Paris peaked over €13 per share in February before tumbling below €9 in March.
“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.”