(BFM Bourse) – This Friday, the bank lowered its opinion on the stock to “online weighting” compared to “overweight” previously.
Air France-KLM is down this Friday. The Franco-Dutch transport group’s shares fell by 4.6% on Friday afternoon at the end of trading.
The stock is penalized by a lowering of recommendation from the Barclays bank, which went from “overweight” to “online weighting”, the equivalent of “buy” to “neutral”. The establishment also reduced its price target to 9.5 euros from 15 euros.
The bank explicitly cites political risk in France to justify its decision. “As the French legislative elections approach, which will take place over the next two weekends, the political outcome is uncertain, but the probability of change is very high,” it writes.
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Towards labor tensions at KLM?
“We believe that the polarization of French politics risks disrupting business and consumer confidence and potentially leading to a worsening of social unrest, which would pose a challenge to Air France’s unit revenues,” Barclays said.
“Furthermore, political instability risks inflaming industrial relations, which have been remarkably well managed at Air France in recent years,” the bank further argues.
If the National Rally or the New Popular Front were to form a government, the cost of labor could increase, she estimates.
“Any anti-globalization protectionist policy would limit the traffic rights of non-French airlines to France, which could be favorable to unit revenues in the short term, but would call into question Air France-KLM’s ability to maintain existing international partnerships and develop new markets,” Barclays also anticipates.
In addition, it could be more difficult to convince the Portuguese government to associate Air France-KLM with the privatisation of the Portuguese airline TAP in a volatile political context, the establishment believes.
Barclays also mentioned political developments in the Netherlands, with repercussions on uncertainties over the future capacities of Schiphol airport, KLM’s hub, which constitute a “significant challenge”.
In addition, the bank sees other short-term hazards, notably citing potential tensions on flight attendants and pilots at KLM. The profitability of the Dutch company could also be affected by stronger growth in short-haul flights than in long-haul flights, she considers.
All this leads the bank to revise its opinion on the value while Barclays appreciates the “strategic position” of the group and the quality of its management.
Julien Marion – ©2024 BFM Bourse
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