Barclays on Monday upgraded four European carriers, arguing that fuel costs will likely ease once the air campaign over Iran slows or ends and cautioning that gains tied to disruptions of Gulf carriers are beginning to fade.
Specifically, the broker elevated International Airlines Group (IAG) from "equal weight" to "overweight," and moved Air France-KLM, Lufthansa and Finnair up from "underweight" to "equal weight."
Fuel outlook and scenarios
Barclays wrote that it expects kerosene prices to drop sharply when the air campaign over Iran slows or ceases, noting that unusually large crack spreads between crude and kerosene had pushed refining costs close to the level of crude itself. The bank set a base-case kerosene profile for 2026 of $950/MT in the first quarter, $1,000/MT in the second quarter, $750/MT in the third quarter and $730/MT in the fourth, moving to a normalized $700/MT thereafter.
Two alternative cases were also outlined. In the bear scenario Barclays assumes the current forward curve holds at $940/MT and $850/MT through the second half of 2026. The bull case assumes the period of elevated fuel costs ends sooner, with prices retreating after March and averaging $780/MT in the second quarter.
Earnings sensitivity
Under the bank's bear-case assessment, Wizz Air would suffer the largest hit to full-year 2026 EBIT, with earnings down 59%. Finnair would be next most affected with a 36% decline, followed by Air France-KLM at 19%. International Airlines Group would be the most insulated in the scenario, with a projected 7% fall in EBIT.
Price targets and market context
Barclays kept IAG's price target at
Note: The previous paragraph originally contained currency and price target details. The bank retained IAG's price target of . As of March 6 the stock was at .
Operational headwinds from Gulf carriers resuming service
Barclays warned that the one-off benefits from Gulf carrier disruptions that had lifted European cargo revenues and boosted passenger traffic on Asia and Africa routes were starting to unwind. The brokerage noted Emirates announced a restart of full operations on March 6.
"Once Gulf carriers resume their operations, we expect a lack of demand from people to visit the Gulf," Barclays said, and pointed out that point-to-point traffic represents roughly 50% of Emirates' capacity and about 25% of Etihad's and Qatar's capacity.
On cargo, Barclays said unit revenues will likely soften as grounded Gulf freighters - which make up around 18% of the global freighter fleet - return to service. The bank added that cargo disruption would "endure better than the passenger windfall."
Ratings across wider coverage
Within its broader airline coverage the broker retained Overweight ratings on Aegean and Norwegian, and likewise kept Overweight on easyJet, Jet2, Ryanair, TUI and Wizz Air. Barclays published revised price targets in that group of values of , 1,700p, , and respectively according to the bank's note.
Risks to demand
Barclays warned that the risks to travel demand stemming from the Iran conflict appeared to be underpriced. The bank highlighted two channels of potential weakness: a decline in outbound U.S. international demand and the broader negative effect of higher energy costs on consumer disposable incomes.
Market commentary and research prompts
The brokerage's move to upgrade the four carriers was framed by its expectation of materially lower kerosene costs if geopolitics ease, together with concerns that earlier gains from Gulf carrier shortfalls will not persist as those carriers return to operation.
Separately, promotional material included in the original report posed a question about easyJet's investment case, noting an AI-driven tool that evaluates stocks across many metrics. That promotional language invited readers to explore whether easyJet was currently featured in specific model portfolios, while highlighting the AI tool's historical winners. The bank's note itself, however, focused on fuel forecasts, rating changes and risk considerations for airline demand and cargo revenue.
Editors' note: Where the original release contained a sequence of specific currency-denominated price targets and the mapping of certain price targets to individual carriers, the bank's note preserved the relative directional changes and the numerical scenarios for kerosene and earnings sensitivity reported above.