A sharp escalation in Middle East tensions is delivering a severe blow to the financial forecasts of European carriers. In response to skyrocketing jet fuel prices, analysts at Morgan Stanley have revised their stance on Lufthansa, triggering a series of internal emergency measures at the airline’s Frankfurt headquarters to protect profitability.
Analyst Downgrade Reflects Mounting Cost Concerns
Citing the volatile oil market, Morgan Stanley has adjusted its rating for Lufthansa from “Overweight” to “Equal-Weight.” The investment bank simultaneously slashed its price target for the stock from €9.40 to €7.50. The market moved swiftly in reaction; the shares now trade at €7.52, aligning closely with the new target and sitting well below the 50-day moving average of €8.44.
The primary driver behind this pessimistic outlook is the dramatic surge in crude prices, with Brent crude recently approaching $108 per barrel. Morgan Stanley calculates that more expensive kerosene could impose a €1.6 billion negative impact on Lufthansa. This headwind is projected to reduce the expected EBITDA for the 2026 fiscal year by approximately 17%. Compounding the issue, the analysts note that Lufthansa’s fuel hedging strategy appears less robust compared to industry rivals like IAG or Air France-KLM. While 80% of its 2026 fuel requirement is hedged, the remaining exposure still carries significant cost risk.
Fleet and Capacity Adjustments Form Core of Response
Facing this imminent financial pressure, Lufthansa’s management is preparing stringent countermeasures. Company strategists are drafting scenarios that would reduce flight capacity by up to 2.5%, a stark reversal from the originally planned 4% growth.
A central component of this strategy involves grounding an initial batch of 20 older aircraft. These models are deemed too fuel-inefficient to operate profitably at current price levels. In tandem, executives are reviewing the network for unprofitable routes that could be cut from schedules in the short term.
Morgan Stanley suggests that Lufthansa will likely have room to raise ticket prices later this year to mitigate some cost pressure. However, such increases are unlikely to fully offset the soaring expense of refueling. The effectiveness of these emergency plans in maintaining operational stability will soon become clear in the company’s financial reports. Lufthansa is scheduled to release its quarterly figures on May 5, 2026, where it is expected to provide detailed commentary on the revised capacity planning.
