Time to sell easyJet and buy Wizz Air?

Wizz Air check-in at Gdansk airport in Poland. Photo: Michal Fludra/NurPhoto via Getty Images.

The poor start to the year for easyJet (LSE:EZJ) shares continued today after a City bank switched to a Sell stance on expectations that short-haul travel will remain a tough segment in 2026.

Deutsche Bank believes that “fitter airlines”, such as those with the lowest unit costs like Ryanair, are more likely to prevail in the current climate.

The bank cut its easyJet target from 535p to 465p, which compares with today’s level of 481p.

• Invest with ii: Open an investment Account | General Investing with ii | Interactive investor Offers

Shares dipped as far as 475p earlier this morning, extending a 6% decline seen so far in 2026. They were at 588p in the summer and more than 800p in 2021.

The selling came during a much better session for eastern European rival Wizz Air Holdings (LSE:WIZZ), which jumped 5% or 64p to 1,287p.

The advance followed a Bloomberg report that said chief executive József Váradi expects 20% growth in capacity in the current financial year.

The figure has been boosted by the addition of Airbus aircraft and return of grounded planes following the disruption of recent Pratt & Whitney engine issues.

The company is due to post third-quarter results on 29 January. It said earlier this month that it carried 5.85 million passengers in December, an 15.5% increase year-on-year after capacity rose 16.3% to 6.81 million seats.

• Investment outlook: expert opinion, analysis and ideas
• ii view: a 30-year-old easyJet holds high ambition
• Taylor Wimpey slumps as profit margin fears overshadow 'robust' 2025

Airline shares have been under pressure this week after a five-day run of higher oil prices put strain on the outlook for jet fuel costs.

In its note today, Deutsche Bank highlighted the consequences of another lacklustre year for UK economic growth on short-haul demand. It also forecast intra-EU capacity growth of 3.5% for the sector this summer, down from 4.2% last summer.

The bank said: “With demand growth having resumed a more normal relationship with GDP, price stimulation was required in real terms leading to flattish outcomes in terms of nominal short-haul fare increases. As we look ahead to 2026, we see a similar set-up.”

Other City firms hold a more optimistic stance on easyJet, including UBS after it said last month that the Luton-based carrier was at an attractive valuation based on its price target of 800p.

It pointed to the impact of easyJet holidays, which has delivered material growth in volumes and profitability. UBS expects the unit to achieve management’s £450 million bottom-line target by 2030.

The bank added: “easyJet remains a well capitalised company with an investment grade balance sheet. Nevertheless, we see the UK economic backdrop and intense capital expenditure program as being a drag for investors.”

• Big yielder among construction top picks
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis
• The FTSE 100 has broken 10,000: which active funds are beating it?

It also said that Wizz is moving in the right strategic direction, with 2026 set to be the low point for earnings. The Pratt & Whitney engine issue contributed to a 62% drop in operating profit to 167.5 million euros (£141 million) for the year to last March, despite record traffic of 63.4 million passengers and total revenues 3.8% higher at 5.3 billion euros.

UBS said: “While the current operating environment is challenging, the medium-term outlook is favourable and we think risk/reward is more on the upside as the company returns to its core Eastern/Central European focus.

“If Wizz is able to demonstrate a continuation of profit growth, then we should see a material recovery in the shares from current levels, in our view.”