Air France-KLM: Keeping it together through the fuel crisis

Research evidence excerpt

Air France-KLM: Keeping it together through the fuel crisis

Alex Irving, CFA +44 20 7676 7044 alex.irving@bernsteinsg.com 31 July 2026

DETAILS

EXHIBIT 1: Air France-KLM investment thesis

Air-France-KLM: Not the Air France you used to know

INVESTMENT THESIS INVESTMENT RECOMMENDATION

Air France‑KLM has undergone a remarkable turnaround since the end of the Recommendation: Market-Perform

last cycle. Formerly weighed down by governance issues, strained labor

relations, overcapacity, and poor capital allocation, the group has been Target price 12 (Months): EUR 12.20 (-1% downside)

fundamentally reshaped. Labor relations are stabilized, the domestic network

rationalized, the fleet simplified, and margins lifted to peer levels, allowing the

group to potentially earn its cost of capital. Its diversified long‑haul network VALUATION MULTIPLES (FY+2)

provides flexibility to redeploy capacity. While further cost‑reduction potential

remains, geopolitical risks leave the carrier more exposed than most due to its

high leverage. 7.8x 7.8x

6.7x

• Diverse network helps steer capacity and support traffic. Air France-

KLM has the most diversified network among the three large European legacy 4.1x

groups. Thanks to this, it is able to flex capacity away from less in-demand 2.5x 3.2x 3.2x 2.6x 2.6x

markets and toward those with richer demand at short notice. That provides it

with greater optionality than others in an increasingly volatile world.

• Air France: most improved award. Air France had an EBIT margin of EV/EBITDA EV/EBIT P/E

less than 2% in 2019, only above one other European legacy airline. In 2025, it 10y median Current BERN TP

delivered a 6.7% EBIT margin — more than triple pre‑pandemic levels and

double KLM’s — leaving KLM now the key area to fix. CHANGES TO TARGET PRICE