British Airways owner, International Consolidated Airlines Group SA, and other European airlines came under pressure after Deutsche Bank reduced price targets across the sector due to a predicted drop in air fares next year.
Analyst Jamie Rowbotham said: “We have seen some weakness in our fares data, with 60-day out prices for travel in August having screened 2% down year on year on average, and walk-up fares in June 6% down.”
While the idea of a slowdown did not resonate with the airlines in recent pre-close conversations, “we are nonetheless exercising some caution,” he added.
Rowbotham has cut forecasts for the September quarter, thinks assumptions for the December quarter are "sufficiently prudent," and predicted fares will fall 6% year on year in 2024 versus a previous expectation of no change.
This has “resulted in a material cut to our profit forecasts which now sit ~20% below consensus on average”, he said.
Deutsche has downgraded IAG and Air France-KLM (OTC:AFLYY) to hold from buy and reduced price targets to 165p from 200p and €1.85 from €2.3.respectively.
The bank retains a buy rating on easyJet plc, but cut its price target to 585p from 635p, and a hold rating on Wizz Air with a reduced price target of 2,850p, down from 3,700p.
Lufthansa remains a buy with a price target of €11, down from €14.5.
Shares in IAG fell 2.6%, Air France-KLM (OTC:AFLYY) dipped 3.6%, easyJet eased 1.3%, Lufthansa slipped 0.9% but Wizz Air gained 0.8%.