(News Bulletin 247) – The American bank lowered its opinion on the stock to “underweight” from “online weighting” previously, judging that the stock is still too high based on the expected operating result. The establishment also expects the company to burn more than 1 billion euros in cash over the next two financial years.

Air France-KLM is suffering once again on the stock market this year, penalized by price pressures, logistical problems, and the pushback effect that the Olympic Games had on Paris as a tourist destination. The stock has fallen to historic lows, and has lost 35% since the start of the year.

For Morgan Stanley, the stock risks further falling. The American bank lowered its advice to “underweight” on value this Tuesday, equivalent to selling in its nomenclature, compared to “online weighting” previously. The establishment also adjusted its price target to 7.10 euros compared to 9.40 euros previously. At Monday’s closing price (8.894 euros) this target implies a fall in the stock of more than 20% over the next twelve months.

On the Paris Stock Exchange, Air France-KLM shares fell 1.5% to 8.76 euros around 3:00 p.m.

Morgan Stanley explains that the positioning of the Franco-Dutch company is unfavorable to it. “Air France-KLM is one of the most exposed carriers in our coverage to Asia-Pacific-Caribbean (APAC), the Middle East-Africa region and business travel demand, all of which remain There are positives for business travel in regions such as Atlantic, but we believe IAG is a better way to play this recovery, and feedback from management teams in other regions. continue to highlight the challenges,” says Morgan Stanley.

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“As for APAC, beyond weak demand trends (in part due to the importance of airlines), competition from Asian carriers is significant,” it adds.

In addition, the bank forecasts that Air France-KLM will burn 900 million euros of cash in 2025 and 300 million euros in 2026, which represents, cumulatively, around half of its market capitalization. This is due, in particular, to the reimbursement of aid affected during the pandemic.

So much so that the debt ratio (net debt compared to gross operating income over twelve months) should remain high in 2026, at around 2.7, calculates Morgan Stanley, compared to 1.7 for Lufthansa and 1 for IAG.

With the 35% drop in its shares over 2024, Air France-KLM is certainly not expensive on the stock market, given its history. Morgan Stanley calculates a multiple of 8.5 times expected operating profit in 2025 compared to a historical median of 9.6. But the group led by Ben Smith remains much more expensive than its competitors, which, on these same bases, trade at 7 times the expected operating profit for Lufthansa, and 4.7 times for IAG.

“We note that differences in accounting methods may weigh on Air France-KLM’s margin comparison versus IAG, but even the most conservative adjustment for this implies that Air France-KLM trades at 6, 2 times, still 33% more than IAG in 2025. We do not believe this premium is justified, given that both carriers offer similar growth, but Air France-KLM has much lower margins.” , explains Morgan Stanley.

Air France-KLM will publish its third quarter results on Thursday November 7. According to a consensus posted online by the company, analysts’ average forecasts stand at 8.89 billion euros for turnover, 1.913 billion for gross operating surplus and 1.236 billion for net profit. .