Oil price correction gives Lufthansa shares lift-off

By Jules Rimmer

German carrier outperforms peers with hedging strategy and airfreight operations

Lufthansa celebrates 100 years since its maiden flight next month but airline stocks have been under pressure after the rise in jet fuel pricing.

Lufthansa shares jumped 7% on Tuesday, continuing to outperform rival airlines since the outbreak of war in Iran.

While the entire sector in Europe rose as oil prices fell, Lufthansa offers investors above-industry-average fuel hedging and a bigger proportion of airfreight revenue, say analysts.

Lufthansa, celebrating the centenary of its maiden flight next month, announced its highest-ever annual revenue of EUR39.6 billion for 2025 last week, beating analyst expectations, as it raised its dividend and lifted 2026 financial guidance.

Both U.S. and European airlines have been hit by hard by the surge in oil prices, which in turn increased jet fuel costs.

BTIG analysts noted airline stocks were showing signs of "downside exhaustion"

The New York-listed Arca Airline index XX:XAL has fallen 9% so far in 2026 while the Global Jets ETF JETS has lost almost 10% over the same period.

Deutsche Bank's Jaime Rowbotham, who has a hold recommendation on Lufthansa with a target price of EUR8.60, warned in an update published Monday that the company's guidance seemed "unadjusted for the Middle East conflict, especially where fuel is concerned given $846/ metric ton is used for unhedged exposures when spot is $1500/mt."

Lufthansa should be better insulated from jet-fuel price turbulence given it ranks second only to Ryanair in terms of its hedging ratio, according to analysts at JPMorgan led by Harry Gowers. Its exposure to Middle East routes is similar to other carriers at around 2%. Wizz (HU:WIZZ) is the most vulnerable with 5% of its traffic flowing through the region, the firm said.

However, where Lufthansa may fare best is if airfreight pricing strengthens, given Middle East airport closures and shipping disruption. Cargo operations account for 20% of the group's earnings before interest and tax, the largest weighting among its peers, the JPMorgan analysts added.

The analyst community is relatively lukewarm on Lufthansa as their mean target price is EUR8.64 versus current levels around EUR8.11.

-Jules Rimmer

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

03-10-26 0928ET