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Air France KLM (AFLYY)
OTHER OTC:AFLYY
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Air France KLM
(OTC:AFLYY)
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Rating:70Outperform
Price Target:
$1.50
▲(26.05% Upside)
Action:UpgradedDate:02/23/26
The score is driven by a strong technical uptrend and very low P/E valuation, supported by positive earnings-call guidance and record operating performance. Offsetting this, financial risk remains elevated due to a stressed balance sheet (high debt and negative equity) and relatively thin, weakening free cash flow.
Positive Factors
Record revenue & operating result
Sustained demand recovery and scale are evidenced by record revenues and the highest operating result historically. A structurally stronger top line and improved operating performance support margin normalization, network leverage and long-term resilience versus cyclical downturns.
Improved cash generation & liquidity
Consistent positive operating cash flow and a large cash buffer materially raise resilience. Durable liquidity enables scheduled capex, fleet renewal and targeted deleveraging, reducing refinancing risk and providing strategic optionality over the next several years.
Ancillary revenue momentum
Robust ancillary growth reflects structural diversification of revenue beyond tickets and higher per-passenger yields. Strong digital adoption and loyalty scale make these streams recurring, enhancing unit revenue durability and lowering sensitivity to fare cyclicality.
Negative Factors
High leverage & weak balance sheet
Elevated gross debt and an equity deficit constrain financial flexibility in a capital‑intensive, cyclical industry. This structure limits ability to absorb shocks, raises refinancing risk and can curtail investment or strategic M&A absent sustained cash generation.
Thin and falling free cash flow
Low FCF relative to earnings and sharp FCF decline indicate working capital swings and capex pressure. Persistent weak FCF impedes durable deleveraging, reduces reinvestment capacity and heightens sensitivity to cost or demand shocks over the medium term.
Transavia profitability pressure
Losses and structural transition costs at Transavia signal execution risk in the leisure low-cost segment. Prolonged weakness or further upgauging costs could depress group unit revenues and margins, limiting the sustainability of consolidated profitability gains.
Air France KLM (AFLYY) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$3.41B
Dividend YieldN/A
Average Volume (3M)14.70K
Price to Earnings (P/E)1.9
Beta (1Y)0.66
Revenue Growth7.97%
EPS Growth970.83%
CountryUS
Employees78,399
SectorIndustrials
Sector Strength72
IndustryAirlines, Airports & Air Services
Share Statistics
EPS (TTM)0.15
Shares Outstanding2,627,698,700
10 Day Avg. Volume28,888
30 Day Avg. Volume14,695
Financial Highlights & Ratios
PEG Ratio-0.48
Price to Book (P/B)-29.80
Price to Sales (P/S)0.92
P/FCF Ratio265.06
Enterprise Value/Market Cap5.91
Enterprise Value/Revenue0.61
Enterprise Value/Gross Profit3.32
Enterprise Value/Ebitda3.52
Forecast
1Y Price Target
$12.80Price Target Upside975.63% Upside
Rating ConsensusHold
Number of Analyst Covering1
EPS Forecast (FY)0.52
Revenue Forecast (FY)$40.59B
Air France KLM Business Overview & Revenue Model
Company DescriptionAir France-KLM SA, together with its subsidiaries, provides passenger and cargo transportation services on scheduled flights in Metropolitan France, Benelux, rest of Europe, and internationally. The company operates through Network, Maintenance, Transavia, and Other segments. It also offers airframe and engine maintenance services; component support services comprising electronic, mechanical, pneumatic, hydraulic, etc.; and other services, as well as operates point-to-point flights to/from the Netherlands and France. As of December 31, 2021, it operated a fleet of 332 aircraft. The company was founded in 1919 and is headquartered in Paris, France.
How the Company Makes MoneyAir France KLM generates revenue primarily through ticket sales from passenger flights, which constitute the bulk of its income. Additional revenue streams include cargo services, where the airline transports freight on its passenger and dedicated cargo flights, and ancillary services that include fees from baggage, in-flight services, and partnerships with hotels and car rental companies. The company also benefits from codeshare agreements and alliances, particularly through its membership in the SkyTeam alliance, which allows it to expand its reach and share resources with other airlines. Significant partnerships with global travel agencies and corporate clients further enhance its revenue through group travel arrangements and corporate contracts.
Air France KLM Earnings Call Summary
Earnings Call Date:Feb 19, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 30, 2026
Earnings Call Sentiment Positive
The call conveyed a primarily positive operating and financial story: record group revenue (EUR 33bn), highest-ever operating result (EUR 2.0bn), strong cash conversion (EUR 1.0bn recurring adjusted FCF), improving unit costs, and meaningful premiumization and sustainability progress. Notable challenges were highlighted—Transavia transition losses, cargo volatility, higher Schiphol-related costs hitting KLM, near-term net debt upticks driven by lease and one-off items, and weather disruption early in 2026. Management presented a clear plan to continue transformation, control costs and pursue an >8% margin target by 2028, while acknowledging execution and external risks. On balance, the strong record results, cash position and strategic progress outweigh the operational and regional headwinds discussed.Q4-2025 Updates
Positive Updates
Record Group Revenue and Passenger Traffic
Group revenues reached EUR 33.0 billion, up 4.9% year-on-year, an all-time high. The group carried nearly 103 million passengers, up 5% YoY and the first time above 100 million since COVID.
Strong Operating Performance
Operating result was EUR 2.0 billion, an improvement of EUR 400 million versus 2024, with an operating margin of 6.1% (up ~1 percentage point year-over-year reported).
Record Net Result and Cash Generation
Reported net result of EUR 1.8 billion (including EUR 700 million unrealized FX); underlying net result ~EUR 1.1 billion. Recurring adjusted operating free cash flow was EUR 1.0 billion, up EUR 800 million YoY. Cash at hand increased to EUR 9.4 billion.
Balance Sheet Strength and Leverage
Net debt to EBITDA stable at 1.7x, within target range. Equity increased by EUR 1.6 billion to EUR 2.4 billion (back to pre-COVID level). Successful bond issuance with coupon below 4% and ongoing simplification of quasi-equity.
Premiumization Driving Revenue Mix and Yields
Top-tier cabins (La Première and Business) accounted for 28.1% of revenue (from 26.9%), premium economy reached 8% of revenue, and premium cabins now generate >36% of group revenue. La Première revenue +17% and Business +9% in 2025.
Ancillary Revenue Momentum
Ancillary revenue rose to EUR 2.1 billion, up 23% YoY (after +26% in 2024), with strong, broad-based growth (seat selection, hand luggage, digital channels).
Fleet Renewal and Sustainability Progress
Next-generation aircraft now represent over 35% of the fleet. SAF blending reached ~2.9% of total fuel consumption (above regulatory requirements). EcoVadis gold medal and CDP rating improved from B to A.
Loyalty Program Growth
Flying Blue surpassed 30 million members (membership doubled since 2022). In 2025, members donated 1.2 billion miles (~2.5% of annual miles issued). Flying Blue recognized as best airline loyalty program by point.me for a second consecutive year.
Operational and Digital Efficiency Gains
Retired more than 200 legacy applications to simplify technology landscape. Cargo bookings: >90% now made via digital channels; global CRM rollout (CRM360) completed enabling AI-enabled services.
MRO & Cargo Commercial Wins
Maintenance & engineering secured >30 new contracts, bringing the order book to EUR 10.7 billion; external maintenance revenues grew >10% driven by engine activity. Cargo recognized as 'airline of excellence in Europe'.
Negative Updates
Transavia Profitability Pressure
Transavia results declined by EUR 52 million (split roughly 50/50 between Transavia NL and Transavia FR). Issues included transition costs from 737 to A320 (upgauging), Orly slot transfers requiring route maturation, a unit size decrease and weaker leisure demand during hot summer months. Q4 saw unit revenue declines (Transavia unit revenue -6% in Q4 while capacity grew).
Cargo Volatility and Q4 Weakness
Cargo performance was mixed: overall flattish year but sharp quarter-to-quarter volatility. Q4 cargo unit revenues declined ~11% YoY (following an elevated Q4 2024), impacted by tariffs, U.S. election-related effects and difficult comps.
Schiphol Costs and KLM Headwinds
Higher Schiphol tariffs materially impacted KLM: management cited ~EUR 100 million in increased landing charges and ~EUR 150 million related impact on revenues (combined ~EUR 250 million headwind). These higher airport/tax costs are a significant drag on KLM margins.
Weather and Operational Disruption in Early 2026
Severe weather at Amsterdam cost the group ~EUR 90 million in Q1/January (with ~80% of that impact on KLM and Transavia), depressing near-term profitability and completion factors.
Net Debt Increase Driven by One-Off Items and Leasing
Net debt rose by ~EUR 1.0 billion due to EUR 300 million hybrid convertible, ~EUR 500 million deferred social charges/wage tax, and ~EUR 800 million new/modified leases tied to A320/A321 introductions plus >EUR 300 million related to 787-9 operational leases—creating near‑term leverage pressure despite management guidance these are temporary.
Unit Cost and Inflation Risks
Although unit cost improved in 2025, management guides ex-fuel unit cost for 2026 at 0%-2% (risk of reaching +2%) due to ongoing inflation, higher ATC/airport/ETS charges (estimated ~0.7% headwind), and execution sensitivity (completion factor/compensation costs).
Regional Demand Imbalances
EU point-of-sale transatlantic demand was weaker, with Europe point-of-sale down (~2%) and specific weakness from Africa and some connecting traffic to the U.S., while U.S. point-of-sale was strong — creating revenue mix and connectivity challenges.
Sustainability Market Limitations
CORSIA and other offset projects face limited, high‑quality project availability; SAF remains the primary decarbonization lever but supply/cost and credible offset projects are constrained, limiting near-term mitigation options.
Company Guidance
The group’s forward guidance emphasized disciplined growth and cost control: capacity is expected to rise 3–5% in 2026 (long‑haul +4%, short/medium haul broadly flat, Transavia +10%), unit cost guidance is 0.0%–2.0% (execution‑dependent), net CapEx around EUR 3.0bn, and the jet fuel bill ~EUR 6.9bn (2025 ≈ 2026) with ~62% of 2026 fuel volume hedged and total hedges covering ~90% of one‑year consumption as tenor extends to 8 quarters; leverage target remains net debt/EBITDA 1.5–2.0 (currently 1.7), cash on hand ~EUR 9.4bn, recurring adjusted operating free cash flow already ~EUR 1.0bn in 2025, and the group reiterates its ambition to exceed an 8% operating margin by 2028 (2025 margin 6.1%) while delivering a “significant positive” adjusted operating free cash flow for 2026; early Q1 signals included January network NTR -0.4% (but +1.1% ex‑snow) and an operational weather cost of ~EUR 90m.Air France KLM Financial Statement Overview
Summary
Income statement is solid (72) with a strong post‑pandemic recovery and improved profitability, and operating cash flow is positive (56). However, the balance sheet is a major constraint (34) with high debt and negative equity, and free cash flow is thin and down sharply, limiting financial flexibility.Income Statement
Profitability has materially improved versus the pandemic years, with TTM (Trailing-Twelve-Months) net income of ~€1.6B and a ~4.8% net margin versus ~1.0% in 2024. Revenue growth is strong in TTM (Trailing-Twelve-Months) (~70.5%), but margins remain modest for the industry and gross margin has trended lower versus 2022–2024 levels, indicating cost/price pressure even as volumes recovered.72
Positive
Balance Sheet
Leverage remains a key constraint: total debt is high (TTM (Trailing-Twelve-Months) ~€22.2B) and shareholders’ equity is still negative (TTM (Trailing-Twelve-Months) ~-€1.0B), which weakens financial flexibility and makes debt-to-equity ratios less meaningful and inherently risky. Asset base is sizable (~€39.4B TTM (Trailing-Twelve-Months)), but the persistent equity deficit suggests the balance sheet has not fully repaired despite improved earnings.34
Negative
Cash Flow
Cash generation is positive with TTM (Trailing-Twelve-Months) operating cash flow of ~€4.9B, a clear improvement from earlier years, but free cash flow is relatively thin at ~€0.45B and down sharply (TTM (Trailing-Twelve-Months) free cash flow growth ~-40%). Free cash flow is also low relative to earnings (TTM (Trailing-Twelve-Months) ~9% of net income), implying working-capital swings, capex intensity, or other cash uses are limiting how much profit converts into durable cash.56
Neutral
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 31.70B | 31.46B | 30.02B | 26.39B | 14.31B |
| Gross Profit | 3.79B | 6.03B | 6.17B | 7.97B | 3.10B |
| EBITDA | 5.07B | 2.98B | 4.64B | 3.73B | -371.00M |
| Net Income | 1.53B | 317.00M | 934.00M | 728.00M | -3.27B |
Balance Sheet | |||||
| Total Assets | 39.43B | 36.16B | 34.49B | 32.30B | 30.68B |
| Cash, Cash Equivalents and Short-Term Investments | 6.04B | 5.98B | 7.38B | 7.23B | 6.80B |
| Total Debt | 22.16B | 14.53B | 13.53B | 14.71B | 16.24B |
| Total Liabilities | 38.35B | 35.36B | 33.99B | 34.78B | 34.50B |
| Stockholders Equity | -982.58M | -1.76B | -2.05B | -3.00B | -3.82B |
Cash Flow | |||||
| Free Cash Flow | 110.46M | -232.00M | -426.00M | 1.88B | -668.00M |
| Operating Cash Flow | 4.38B | 3.50B | 3.13B | 4.86B | 1.53B |
| Investing Cash Flow | -2.91B | -2.77B | -3.24B | -2.15B | -1.24B |
| Financing Cash Flow | -1.55B | -2.11B | -285.00M | -2.76B | -77.00M |
Air France KLM Technical Analysis
Negative
1.19
Price Trends
1.37
Negative
1.32
Negative
1.31
Negative
Market Momentum
0.03
Positive
41.78
Neutral
47.70
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AFLYY, the sentiment is Negative. The current price of 1.19 is below the 20-day moving average (MA) of 1.43, below the 50-day MA of 1.37, and below the 200-day MA of 1.31, indicating a bearish trend. The MACD of 0.03 indicates Positive momentum. The RSI at 41.78 is Neutral, neither overbought nor oversold. The STOCH value of 47.70 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for AFLYY.
Air France KLM Peers Comparison
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $14.29B | 11.34 | 140.98% | 3.50% | 6.81% | 58.22% | |
73 Outperform | $33.02B | 13.61 | 28.00% | 1.37% | 14.75% | 71.73% | |
71 Outperform | $33.38B | 10.09 | 23.99% | ― | 4.24% | 20.29% | |
70 Outperform | $3.41B | 1.90 | ― | ― | 7.97% | 970.83% | |
70 Outperform | $41.96B | 8.58 | 27.70% | 0.96% | 4.33% | -1.58% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
61 Neutral | $23.72B | 62.19 | 4.82% | 1.73% | 0.65% | ― |
* Industrials Sector Average
AFLYY
Air France KLM
1.19
0.28
30.30%
DAL
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64.60
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19.57%
RYAAY
Ryanair Holdings
63.99
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38.94%
LUV
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47.75
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65.68%
UAL
United Airlines Holdings
102.54
16.33
18.94%
LTM
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49.94
19.32
63.10%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.