Will these airlines take off in 2026?

British Airways owner IAG delivered for investors in 2025, but it was a turbulent year for holders of easyJet and Wizz Air. How will they fare in 2026?

17th December 2025 15:32

by Graeme Evans from interactive investor

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A preference for easyJet (LSE:EZJ) over International Consolidated Airlines Group SA (LSE:IAG) has been disclosed by a City bank after it examined 2026 prospects in an “attractively valued” European airline sector.

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UBS remains constructive on the industry as a whole as it views supply and demand dynamics as favourable, with profit growth set to come from fuel tailwinds, falling inflation and interest rates and the continued importance of travel.

It notes that valuations in general are below their five- and 10-year average, suggesting a material downturn over the next 12 months that the bank believes will not be the case.

The analysis follows a contrasting year for share prices in the sector after strong performances by Ryanair, Air France-KLM (EURONEXT:AF), Deutsche Lufthansa AG (XETRA:LHA) and British Airways owner IAG but double-digit percentage drops for easyJet, Jet2 Ordinary Shares (LSE:JET2) and Wizz Air Holdings (LSE:WIZZ).

UBS continues to see upside risk to its coverage in general, with its recommendations leaning towards the short-haul sector based on Buy positions on easyJet, Ryanair and Wizz Air.

The bank regards Ryanair as the industry short-haul leader, given its “enviable” ultra-low cost of production and an undemanding valuation multiple that’s supported by share buy backs.

The 800p price target for easyJet represents a 56% upside, while the 1,580p estimate for Wizz Air is 28% higher.

The bank believes that easyJet is trading at an attractive valuation given the expected performance of its holidays division, which has delivered material growth in volumes and profitability. UBS expects the division to achieve management’s £450 million target by 2030.

It 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.”

It also believes Wizz is moving in the right strategic direction, with 2026 set to be the low point for earnings.

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.”

IAG is an anti-consensus Sell recommendation as the bank remains concerned about the pressure on the UK consumer given tax rises and the uncertainty around North Atlantic routes. It also flags the potential impact from changes to its loyalty programme.

Graeme Evans owns Wizz shares.

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