Deutsche Bank has lifted its price targets for three European network airlines, citing a notable drop in the forward jet fuel curve that allowed the broker to mark its unhedged fuel assumptions lower.
Target changes
Analyst Jaime Rowbotham raised the target price on Air France-KLM to 2 from while keeping a "hold" recommendation. International Airlines Group's target was raised to 540 pence from 460 pence with the broker maintaining a "buy" rating. Deutsche Lufthansa's target moved up to from , also retaining a "hold" rating.
Fuel assumptions and marking to market
Rowbotham noted that "the forward curve has also come down significantly," prompting Deutsche Bank to set unhedged fuel assumptions at $910 per metric ton for the third quarter of 2026, $875 per metric ton for the fourth quarter of 2026, and $830 per metric ton for 2027.
At IAG and Lufthansa, Deutsche Bank's earlier assumptions were made "at the height of the ME conflict and of concerns in terms of the outlook for jet fuel," and moving those assumptions to current market levels has produced low-single-digit percentage reductions in the broker's estimated fuel bills for 2026.
Updated 2026 fuel bill estimates versus company guidance
- Deutsche Bank now estimates IAG's 2026 fuel bill at .56 billion, compared with IAG's own guidance of roughly billion issued on May 8.
- For Lufthansa, Deutsche Bank's 2026 fuel bill estimate is .69 billion, versus the company's guidance of about .9 billion issued on May 6.
- At Air France-KLM, where the broker's prior assumptions were recorded earlier in the crisis, marking to market raised Deutsche Bank's 2026 fuel bill estimate by a high-single-digit percentage to .09 billion. That estimate remains below Air France-KLM's guidance of approximately .3 billion issued on April 30.
Implications
The adjustments in unhedged fuel assumptions and the resulting revisions to 2026 fuel bills underpin Deutsche Bank's decision to raise price targets across the three carriers. The changes reflect the broker's current view of the forward fuel curve and its impact on carriers' unit costs given differing hedging profiles and timing of prior assumptions.
Note: All figures and guidance dates are reported as provided by Deutsche Bank and the companies in their guidance statements.