European Airline Stocks: Bernstein’s Positive Outlook for 2026
European airlines are on a promising path, thanks to lower fuel costs and a surge in travel demand expected in 2025. According to Bernstein, the airline industry’s earnings before interest and taxes (EBIT) is projected to rise from €9.5 billion in 2024 to €11 billion in 2025. This growth is important as it showcases the resilience and potential for profitability in the aviation sector.
Future Profitability of European Airlines
The overall profitability of the airline sector is anticipated to reach around €13.4 billion by 2026. This increase is driven largely by effective fuel hedging strategies that airlines will implement in the upcoming years. With structural aircraft shortages affecting supply, high fare levels are likely to remain, creating a favorable market for airlines positioned to succeed.
Key Performers in the European Airline Market
Bernstein has highlighted three standout airlines that are expected to thrive despite the challenges in the market:
IAG (International Airlines Group): IAG, which owns British Airways and Iberia, is well-equipped to take advantage of limited airport slots in London. Iberia is also benefiting from rising demand from Latin America to Europe. The company achieved a remarkable 22% return on invested capital (ROIC) in 2024.
easyJet: This airline provides a more affordable option for investors looking to benefit from market constraints. Despite being a lower-margin airline, easyJet has more potential to gain from industry improvements compared to its competitors. The company’s holiday business is growing and could contribute significantly to earnings.
Wizz Air: Though it faced several challenges, Wizz Air is making strategic changes to focus on profitability. The airline has adjusted its growth goals and is prioritizing efficiency over expansion. Wizz Air reported a net profit of €365.9 million, a significant change from a loss the previous year.
Details on IAG’s Performance
IAG is Bernstein’s top pick due to its unique advantages. The airline has reported a first-quarter operating profit of €68 million, showing a strong recovery from a loss during the same period last year. The growth in its Iberia business and increased demand during peak travel times, like Easter, have bolstered its financial standing.
easyJet’s Strategic Position
easyJet offers a less expensive entry point for investors compared to competitors. Although it reported a headline loss of £350 million before tax, this was an improvement over its own expectations. The airline also sees strong summer bookings, which bodes well for its recovery and future profits.
Wizz Air’s Shift Toward Profitability
Wizz Air is undergoing a strategic retreat, decreasing its growth ambitions and closing unprofitable ventures like its Abu Dhabi joint project. This approach is expected to lower its debt levels significantly over the next few years. The airline’s modern fleet is positioned to support its plans for profitable growth in Central and Eastern Europe.
Market Analysis and Future Outlook
The European airline sector is set to benefit from a combination of lower fuel prices and growing demand. Bernstein’s analysis suggests that as airlines navigate challenges like aircraft shortages and fluctuating demand, those that adapt effectively will see sustained profitability. Investors can expect strong returns, particularly from airlines with solid operational strategies and market positioning.
Cheaper fuel costs will enhance profit margins.
Increased travel demand is likely to continue boosting revenues.
Airlines implementing smart hedging strategies are expected to thrive.
As we look ahead, the European airline landscape appears bright, with opportunities for growth and profitability for those airlines that are prepared to meet the challenges head-on.
