Is it time to sell your airline stocks?
Airlines have been one of the hardest-hit industries as a result of the war in Iran, and the industry is struggling to recover from a succession of punishing shocks.
The Covid pandemic was a challenging start to the decade for the airline industry, as it all but shut down global travel. Two years later, Russia’s invasion of Ukraine sent oil prices sky-high, pushing up input costs for airlines.
The story has been similar in 2026, with the US/Israeli conflict with Iran prompting the closure of the Strait of Hormuz, through which around a fifth of global oil supplies previously moved, adding further upward pressure onto the cost of jet fuel while pushing global inflation higher.
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“High oil prices are turning the coming winter into a stress test for airlines,” said Lale Akoner, global market strategist at investing platform eToro. “Fuel and labour costs are rising, while geopolitical disruption and pressure on household budgets make it difficult to pass them on through higher fares.”
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The International Air Transport Association warned in June that global airline profits would halve in 2026 due to higher fuel costs.
Airline stocks have been punished. The NYSE Arca Airline Index, an index of US-listed airlines, fell 11.9% in 2026 through to 10 September, while the STOXX Europe Total Market Airlines Index, which comprises European-listed airlines, fell 12.8% over the same period.
But while it is undoubtedly a challenging period for the sector as a whole, are there opportunities amid the disruption?
What does EasyJet’s acquisition mean for airline stocks?
One of the biggest consequences of the rout in airline stocks appears to be the acquisition of EasyJet (LON:EZJ) by US-based private equity firm Apollo.
EasyJet rejected a sequence of bids from private equity firm Castlelake, calling the bids “opportunistic” given they followed a sharp nosedive in the airline’s share price. EasyJet’s share price had declined by over 30% in the 12 months to the end of May, before Castlelake’s first bid.
Eventually, though, Castlelake’s rival Apollo made a bid that EasyJet’s board felt compelled to accept, and it now looks as though the airline will be acquired.
“EasyJet is now a different kind of investment, with Apollo agreeing to buy the airline for 715p a share,” said Akoner. “The deal, which appears likely to be completed, has largely insulated the shares from the latest fuel shock.
“However investors should be wary as most of the takeover gain has already been captured, leaving limited additional upside before the expected completion in early 2027.”
EasyJet’s takeover highlights the extent to which airlines are under pressure, and that this creates an opportunity that institutional investors are already exploiting.
“We think this difficult backdrop could still produce winners,” said Akoner. “Airlines are already cutting unprofitable routes, and weaker operators may have to go further. Fewer available seats should support ticket prices and allow the most efficient airlines to increase market share.
“For investors, the sector increasingly looks like a contest between companies with genuine cost and balance-sheet advantages and those relying mainly on passenger growth.”
Which airlines could be resilient?
Andrew Hollingworth, founder and portfolio manager at Holland Advisors, is of the view that the worse things get for most airlines, the better they are for Ryanair (DUBLIN:RYA) as it has permanent pricing power.
“Ryanair is the lowest cost producer,” said Hollingworth. “If they put their prices up by three euros, [no other airline] is remotely near them, so everyone’s got to pay. “
Most other airlines, though, only have pricing power when the winds are blowing in their favour.
“If the oil price is moderate or rising, but the economy is good, and demand on their routes is good, and they haven’t got new competitors, they can put their prices up and pass on cost inflation,” said Hollingworth. “But if the economy isn’t so good, but the fuel price is still rising, hard luck. There isn’t enough demand to pass on the cost inflation.”
Like Ryanair, Jet2 (LON:JET2) is also a low cost provider, but it offers more to customers through its scale economy than low prices alone.
“It’s not actually an airline, it’s a package holiday company,” said Hollingworth. “Jet2 gives you good value for money on a package holiday, but it also gives you customer service.”
That gives the company excellent customer loyalty, but Hollingworth doesn’t believe this is fully priced.
“The stock market’s got it on a very low P/E ratio because it says ‘it’s just another average tour operator like Tui,’ but that’s not how the customer sees it,” he said. “The customer sees that they give them value for money, they give them good quality service.”
How to invest in airline stocks
If you think it’s time to buy rather than sell airline stocks, you have a few options (besides buying the shares of companies outright).
There are a number of thematic exchange-traded funds (ETFs) tracking the travel sector that offer exposure, such as the iShares STOXX Europe 600 Travel & Leisure UCITS ETF (DE:EXV9) which is a tracker fund following its namesake index, and the US Global Investors Travel UCITS ETF (LON:TRIP) which is an actively-managed ETF offering exposure to travel and tourism stocks. While both of these are diversified travel and leisure funds, airline stocks like Ryanair feature prominently in both portfolios.
Another option is the VT Holland Advisors Equity Fund, which is managed by Hollingworth. It holds Jet2 as its largest holding (with 8.1% of the portfolio) and Ryanair as the sixth-largest (with 4.4%) as of 28 August. Note this isn’t an airlines-focused fund, but one which aims to invest in compelling business models trading at favourable valuations across a range of sectors.
