Air France-KLM: Operating Costs Need To Come Down

Summary

  • Hold rating recommended for Air France-KLM stock due to concerns about cost increases and their impact on EBITDA performance and FCF.
  • Topline growth expected with increasing volume and pricing, but cost management is a concern.
  • Valuation suggests a target share price of EUR12.70 based on forward EBITDA approach and assumptions of top-line growth and cost control.

Medium shot of girl looking out window of commercial airplane

Thomas Barwick

Investment summary

My recommendation for Air France-KLM (OTCPK:AFLYY) stock is a hold rating. Although I hold a positive view on the topline outlook, I am worried about further cost increases that would put pressure on near-term EBITDA performance

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I focus on long-term investments while incorporating short-term shorts to uncover alpha opportunities. My investment approach revolves around bottom-up analysis, delving into the fundamental strengths and weaknesses of individual companies. My investment duration is the medium to long-term. Ultimately, I aim to identify companies with solid fundamentals, sustainable competitive advantages, and growth potential.

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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