Analyst Upgrade Drives Sector Gains
Shares of Rolls-Royce Holdings (LSE:RR.), Safran (EU:SAF) and MTU Aero Engines (TG:MTX) moved sharply higher on Wednesday after Berenberg upgraded Rolls-Royce to “buy” from “hold” and increased its target price to 1,430p from 1,270p.
The broker pointed to Rolls-Royce’s strong operational performance, highlighting the company’s relatively young engine fleet and industry-leading growth in flying hours despite the challenges posed by higher fuel prices following the U.S.-Iran conflict.
By 05:10 ET (09:10 GMT), Rolls-Royce shares had climbed 4.55%, while Safran advanced 4.91% and MTU Aero Engines gained 3.71%.
Berenberg maintained its “buy” recommendation on Safran with a €355 target price, while reiterating a “hold” rating on MTU and setting a €350 target compared with its 11 June closing price of €306.70.
Rolls-Royce Outperforms Peers on Flight Activity
According to Berenberg, Rolls-Royce recorded the strongest growth in engine flying hours among major European aerospace peers during the first five months of 2026.
Using Cirium data, the broker calculated that programme-weighted, thrust-adjusted flying hours for Rolls-Royce engines increased 5% year-on-year between January and May. By comparison, Safran posted growth of 2%, while MTU experienced a 1% decline.
“Rolls-Royce has the youngest engine fleet on a thrust-adjusted basis and has achieved the highest growth in flight hours ytd compared to European peers,” analysts said.
Younger Fleet Supports Long-Term Growth
Berenberg noted that Rolls-Royce’s fleet remains the youngest among the three manufacturers on a thrust-adjusted basis.
The average age of Rolls-Royce’s adjusted fleet was estimated at 12 years, compared with 12.2 years for Safran and 14.5 years for MTU. Engines less than a decade old accounted for 51% of Rolls-Royce’s fleet, versus 43% for Safran and 35% for MTU.
The broker believes this younger installed base supports stronger utilisation rates and longer-term growth opportunities.
Widebody Exposure Provides Protection
Rolls-Royce’s heavy exposure to widebody aircraft was also identified as a competitive advantage in the current environment.
Widebody engines represented 92% of the company’s adjusted fleet, helping shield it from capacity reductions that have been more heavily concentrated among narrowbody aircraft operators.
Berenberg’s review of more than 50 airlines indicated a 2.8% reduction in narrowbody capacity this year, compared with a 2.4% decline for widebody aircraft. The analysis was based on expectations that jet fuel prices could average $152 per barrel in 2026, representing a 69% increase year-on-year.
Safran’s adjusted fleet had 22% exposure to widebody aircraft, while MTU’s exposure stood at 48%.
Middle East Weakness Hits Competitors Harder
The report also highlighted differing regional performance trends.
MTU’s adjusted flying hours in the Middle East declined 23% year-to-date, compared with a 15% drop for Safran and a more modest 7% decrease for Rolls-Royce.
The findings suggest Rolls-Royce has been more resilient to disruption in one of the aviation industry’s most important long-haul markets.
Profit Forecasts Cut Across Airline Industry
The aerospace sector continues to navigate a difficult backdrop as airlines grapple with higher operating costs.
The International Air Transport Association (IATA) recently reduced its forecast for global airline net profit in 2026 to $23 billion from $41 billion, representing a 44% downgrade. The industry generated an estimated $45 billion profit in 2025.
The revised outlook assumes jet fuel prices rise by 69% and also reflects expectations of weaker growth in airline capacity. IATA lowered its forecast for available seat kilometre growth in 2026 by 3.1 percentage points to 1.6%.
Middle Eastern airlines are now expected to post a net loss under the organisation’s latest projections.
Berenberg Raises Rolls-Royce Earnings Expectations
Reflecting its confidence in the company’s outlook, Berenberg increased its 2026 free cash flow forecast for Rolls-Royce by 3% to £3.77 billion.
The broker also raised its estimate for underlying EBIT by 2% to £4.05 billion.
Berenberg expects the group’s Defence and Power Systems divisions to contribute approximately 43% of total EBIT in 2026, providing additional diversification beyond its civil aerospace operations.
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