Barclays cautious on European airport stocks as airlines curb winter capacity

Investing.com -- Barclays downgraded airport operator Fraport to "underweight" from "equal weight" on Tuesday, citing weaker winter traffic, and cut its price target to €57 from €68.

It also downgraded Athens International Airport to "underweight" from "equal weight", while raising its price target to €10.95 from €10.70 =. Barclays said the stock’s recent strength, which it suspects was driven by index buying, has left it overvalued.

Athens shares have risen about 20% since Sept. 1, while the Stoxx 600 has fallen about 2.5%, Barclays said, leaving about 10% downside to its raised target. The higher target reflects a cut in its cost of equity to 7.6% from 7.9% after Greece was upgraded from emerging to developed market status.

Athens is also bidding for a 40-year concession covering 22 regional Greek airports serving a combined 2.4 million passengers. Barclays said the outcome is uncertain and does not materially change its near-term earnings outlook.

Barclays expects airlines to reduce capacity plans this winter unless fuel prices fall back sharply. It noted that airBaltic, Volotea and AnimaWings have filed for bankruptcy protection in recent weeks and expects other small airlines to follow.

For Fraport, Barclays forecast third-quarter underlying EBITDA of €553 million =, 8% below Bloomberg consensus. It raised its labour-cost assumptions to account for a favourable one-off in the year-earlier comparison.

It cut its 2026 and 2027 Frankfurt passenger forecasts to 63.0 million and 65.3 million from 63.2 million and 66.5 million, respectively.

It also lowered its underlying EBITDA forecasts by 2% and 4% to €1.40 billion and €1.54 billion, while cutting its adjusted earnings-per-share estimates by 11% and 29%. New terminals in Frankfurt and Lima will also increase depreciation and interest costs below EBITDA, Barclays said.

Barclays said Lufthansa is focused on improving revenue per unit and is likely to remain cautious on capacity this winter.

Condor, which has supported Frankfurt traffic growth over the past 18 months, is also likely to become more cautious as fuel prices remain high.

Fraport is likely to retain its ground-handling contract with Lufthansa because there are no operationally ready alternatives, Barclays said.

However, it does not expect this to guarantee a material earnings uplift. Higher handling charges would increase Lufthansa’s cost per turn at Frankfurt compared with its other hubs, while Barclays sees Lufthansa as having greater negotiating leverage than Fraport had anticipated.

Barclays kept "overweight" ratings on ADP and Aena and "equal weight" on Zurich Airport.

It left its ADP price target at €150, implying about 40% upside. Its 2026 EBITDA forecast is marginally below company guidance after factoring in an estimated additional infrastructure-tax charge of about €40 million. Barclays said focus will be on ADP’s efforts to secure its eight-year economic regulation agreement in November.

For Aena, Barclays kept its €28.50 target and expects Spanish passenger traffic to rise 4.5% in the third quarter. It forecasts third-quarter revenue of €2.02 billion and EBITDA of €1.35 billion, 2% and 6% above Bloomberg consensus, respectively.

Barclays cut its Zurich Airport price target to 200 Swiss francs from 215 francs, citing weaker traffic and international earnings forecasts, including a slower passenger ramp-up at Noida.

Original Article

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