BofA Names Top EU Airline Stocks Ahead of Earnings Season

Bank of America highlighted two of its preferred picks among European airline stocks as carriers prepare to report third-quarter results, with both selections earning Buy ratings based on pricing resilience and balance sheet strength amid industry headwinds.

The broker’s constructive stance comes as the sector faces pressure from elevated fuel costs and geopolitical uncertainties, with BofA’s analysts emphasizing companies best positioned to navigate near-term challenges while delivering shareholder returns.

IAG

BofA enters IAG’s November 6 results with a constructive view, naming it a top pick with a Buy rating. The investment case centers on transatlantic strength, as U.S. carriers push up pricing due to lower fuel hedging compared to European peers, which should keep yields firm on Atlantic routes. IAG is expected to return to modest capacity growth after contracting last quarter, while ex-fuel unit costs remain broadly contained. BofA favors IAG’s balance sheet, margins and returns at a time when fuel costs and Middle East-related earnings pressure weigh on the sector. The broker also sees room for additional shareholder returns. BofA expects third-quarter pre-exceptional EBIT of approximately €1.88 billion, roughly 2% above consensus, with full-year EBIT broadly in line. Key items to watch include corporate and leisure demand, forward bookings, fuel and hedging commentary, transatlantic momentum and the ex-fuel cost outlook.

Ryanair 

BofA is equally upbeat on Ryanair, its other top pick, with the central theme being that pricing is better than feared. Summer fares were soft, but close-in bookings picked up in September and Ryanair management expects modestly positive winter fares year on year. BofA sits above consensus on that view, helped by capacity cuts across the three big low-cost carriers, which should support the supply-demand balance in short-haul Europe. The main vulnerability is fuel, as forward jet fuel prices for 2027 sit well above BofA’s forecast and Ryanair has little hedged beyond this year, leaving cost risk skewed upward. BofA offsets that concern with Ryanair’s balance sheet strength and its ability to gain share when the industry is under strain. The broker also notes that the Boeing Max 10 delivery programme remains on track. BofA forecasts third-quarter EBIT of approximately €1.87 billion, roughly 4% above consensus.