Growing tensions in the Middle East are pushing up the price of black gold, to the great dismay of the airline sector as a whole, already facing a constant increase in costs. The stock remains very poorly valued, but caution is required.
The decline in oil prices in recent months was a blessing for AirFrance-KLM, a major consumer of kerosene. But growing tensions in the Middle East are pushing up the price of black gold, to the great dismay of the airline sector as a whole, already faced with a constant increase in costs.
On the stock market, the summer had been good for airlines: their prices had increased by 20 to 30%, for some. Although the sector, which is very cyclical, often experiences marked fluctuations, the extent of the recent increase was surprising in the face of economic uncertainties and delivery times for parts; it was explained by the drop in the price of oil and the improvement of the outlook for 2025. In recent weeks, however, the conflict between Israel and Iran has worsened, causing oil to rise again.
Furthermore, the second quarter results were significantly lower than expected, which weighed on the share price. The Franco-Dutch group had already issued a warning on its turnover due to the negative effect of the Paris Olympic Games on its activity. In the end, operating profit was reduced by 40 million euros. Management expects unit costs to increase by 2% in the third quarter and in 2024 (1 to 2% previously). Note that Lufthansa has also revised its annual forecasts downwards.
Conclusion
The consensus has further lowered its forecasts for AirFrance-KLM: annual turnover is now expected at 31.35 billion euros (30 billion in 2023) and operating profit, at 1.58 billion euros (2023: 1.7 billion euros). The stock remains very poorly valued, but the specter of a surge in oil prices encourages us to be cautious; we are lowering our recommendation one notch.
Tip: keep/wait
Risk: high
Rating : 2C
Course: 8.25 euros
Ticker : BY FP
Code ISIN : FR0000031122
Market: Paris
Capit. stock market: 2.16 billion EUR
C/B 2023 : 7
Expected P/E 2024: 3.5
Perf. price over 12 months: -34%
Perf. price since 01/01: -39%
Dividend yield: –
