Goldman Sachs Downgrades Lufthansa to Sell on Fuel Costs

Goldman Sachs Downgrades Lufthansa Amid Fuel Cost Concerns

Goldman Sachs has downgraded German airline Lufthansa from a "Neutral" to a "Sell" rating. The revision follows a forecast that the carrier faces an approximate $1 billion loss on its fuel hedges, driven by surging jet fuel prices linked to Middle East conflict.

Lufthansa's 2026 Earnings Outlook Diminishes

The investment bank projects a significant decline in Lufthansa's earnings for 2026, forecasting an earnings before interest and tax (EBIT) of €1.59 billion. This figure is 24% below the Bloomberg consensus and represents a 19% drop from 2025 projections. The negative outlook is directly tied to jet fuel costs reaching a 20-year high.

Impact on Airline Valuations

In contrast to Lufthansa, Goldman Sachs maintained a "Buy" rating for IAG, the owner of British Airways. While IAG's 2026 EBIT forecast of €4.45 billion is also below consensus, the bank's outlook for the company remains more favorable, highlighting differing strategies for navigating the current high-cost environment.

Summary and Forward Outlook

Lufthansa faces considerable financial pressure from its fuel hedging strategy amid volatile energy markets. Investors will closely monitor the airline's ability to manage costs and the broader impact of fuel prices on the aviation industry's profitability leading into 2026.

FAQ

Q: Why did Goldman Sachs downgrade Lufthansa?
A: Due to a projected $1 billion loss on fuel hedges and an anticipated earnings collapse in 2026 caused by record-high jet fuel prices.

Q: What is Lufthansa's new rating from Goldman Sachs?
A: The rating was lowered from "Neutral" to "Sell".

Source: Investing.com