Air France - KLM "Less uncertainty and lower fuel headwind leads to upgrades"

Research evidence excerpt

Air France - KLM "Less uncertainty and lower fuel headwind leads to upgrades"

Forecast returns

Forecast price appreciation 8.3%

Forecast dividend yield 0.0%

Forecast stock return 8.3%

Market return assumption 7.7%

Forecast excess return 0.6%

Company Description

Air France-KLM is one of the largest commercial airlines globally by revenue and a leader in

international air transport departing from Europe with expertise also in cargo transport and

aircraft maintenance. With a combined fleet of around 600 aircraft (split among Air France,

KLM Royal Dutch Airlines and Transavia), the group provides services to several hundred

destinations in over 100 countries, mainly from hubs at Paris Charles de Gaulle and

Amsterdam Schiphol airports. In 2025, the airline flew over 100 million passengers

worldwide. The Dutch and French governments have large shareholdings in the company.

Valuation Method and Risk Statement

Trading airlines stocks may be hazardous to your wealth. Over the long term, a diversified

portfolio of airline stocks has reliably underperformed broader market averages. Our

estimates -- which form the basis for our valuations and stock price targets -- are subject to a

very high degree of error and may be materially inaccurate. This forecast error is primarily

driven by revenue volatility -- a function of unpredictable business travel spending combines

with significant operating and financial leverage. Other sources of error include but are not

limited to jet fuel price volatility, low cost carriers, labour disruptions, bankruptcy risk, and

significant event risk associated primarily with terrorist actions. All of these risk factors

combine to make our estimates statistically unreliable -- but it's still the best we can do. We

value Air France-KLM on 3x 27e EV/Ebitda.