British Airways owner International Consolidated Airlines Group's (LSE:IAG) shares climbed 2% to 463.6p after Deutsche Bank upgraded its target price on the back of lower fuel cost forecasts for European airlines.
Analysts raised their target price on the FTSE 100-listed airline to 540p from 460p and reiterated a 'buy' recommendation.
Deutsche Bank's target prices on Air France-KLM (OTC:AFLYY) and Lufthansa were also raised, with 'hold' ratings maintained on both stocks.
The analysts noted that the forward curve for jet fuel had fallen "significantly" in recent weeks, prompting new mark-to-market assumptions for airlines' unhedged fuel requirements.
As a result, the estimate for IAG's 2026 fuel bill has been cut to €8.6 billion from management guidance of around €9 billion issued in May, with previous assumptions made during heightened concerns over the Middle East conflict and fuel markets.
For Lufthansa, Deutsche now forecasts a 2026 fuel bill of €8.7 billion, below company guidance of around €8.9 billion.
At Air France-KLM (OTC:AFLYY), revised assumptions increased the fuel cost estimate to €8.1 billion, which is lower than the airline's guidance of around €8.3 billion.
The analysts said lower fuel prices were particularly beneficial for IAG and Lufthansa because earlier estimates had been based on fuel market conditions during the peak of geopolitical tensions, resulting in lower projected fuel bills and improved earnings expectations.
