This year will be a better year for airline stocks, with Aer Lingus parent IAG the top pick in the sector, and Ryanair remaining a buy, according to Bank of America (BofA) in its 2025 outlook.
Along with EasyJet, Ryanair has the strongest balance sheet, it says. Ryanair also has the lowest sensitivity to fuel price increases.
Fellow low-cost carrier (LCC) Wizzair is the most exposed in this regard, although each of Europe’s three LCC airlines – Ryanair, EasyJet, Wizzair – appear inexpensive relative to historical norms. So does IAG; despite almost doubling in 2024, shares “look cheap”, trading on 6.1 times estimated earnings.
One reason valuations look unchallenging is that airlines underperformed the Stoxx 600 by 12 per cent on average in 2024. However, BofA’s data also shows that such underperformance has become routine, with the sector underperforming in six of the last seven years. Clearly, cheap stocks can get cheaper.
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