Air France-KLM Shares Risk Plunging to One Euro, Analysts Say

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Air France-KLM is the most vulnerable of Europe’s major legacy carriers to an extended slump in passenger traffic and its share price could fall to one euro, according to analysts at Bernstein.

The Franco-Dutch airline is in need of another multi-billion euro bailout and “likely has insufficient liquidity to continue into 2022,” the analysts including Daniel Roeska wrote in a study published Tuesday. “The scale of the hole in AF-KLM’s balance sheet is large, and incremental debt-carrying capacity so small, that a substantial dilution looks highly probable,” they said.

While British Airways owner IAG SA and Deutsche Lufthansa AG may also need to raise equity should travel fail to rebound during the summer months, Air France-KLM is facing the most imminent crunch. A capital raise could push the stock to a fraction of current levels, the analysts said, and the stock fell as much as 2.4% to 4.8 euros in Paris before paring losses.

The French and Dutch governments have been in talks for months on a fresh bailout package for the airline, in which they own a combined 28% stake. Bruno Le Maire, France’s finance minister, on Monday said “intense” discussions are also underway with the European Commission, which is demanding so-called remedies that would allow more competition in exchange for additional state aid.

Air France-KLM was already struggling before the airline industry was laid low by travel restrictions to slow the spread of Covid-19. Last year, the carrier received a combined 10.4 billion euros ($12.6 billion) in state loans and guarantees.

IAG “remains the only investable” legacy airline for Bernstein, which said progress in vaccination in the U.K. and U.S. may reopen transatlantic travel faster than other intercontinental routes.

©2021 Bloomberg L.P.

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