Barclays has picked out IAG and Ryanair as its preferred names in Europe’s airline sector and argued that elevated fuel costs are doing more than squeezing margins.
They are beginning to redraw the competitive map.
At a moment when the world is facing oil volatility, supply disruption, and fare pressure, the broker’s call is effectively a survival-of-the-fittest trade.
It signalled that the weaker carriers may struggle to absorb the shock, while stronger airlines could emerge with more market share and firmer pricing power.
That makes this more than a routine broker note on two stocks. It is a broader wager that stress in the industry will sort the likely winners from the vulnerable.
Fuel costs as pressure points
The immediate backdrop for the Barclays call is clear.
Jet fuel is one of the biggest operating costs for any airline, and the current energy shock has made that burden even harder to manage.
Europe’s airport industry group warned the region could face a systemic jet fuel shortage within three weeks unless the Strait of Hormuz reopens.
The warning underlines how fragile supply conditions have become ahead of the busy summer season.
In March, carriers across Asia and Europe begun raising fares, adding fuel surcharges, and adjusting schedules as the Middle East conflict pushed up jet fuel costs and disrupted key air routes.
European jet fuel prices had doubled since the late-February strikes on Iran, and the airline chiefs warned that a prolonged conflict would mean higher fares and potentially tighter fuel availability.
The economics are simple, as when passenger demand remains steady, profits can come under pressure if fuel costs rise faster than ticket revenues.
That is why Barclays’ argument carries weight.
The real issue is not just whether oil stays high, but which airlines have the balance sheet and network strength to absorb the shock better than rivals.
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Why Barclays likes IAG and Ryanair
Within that framework, Barclays sees IAG and Ryanair as the standouts.
IAG, the owner of British Airways, is attractive because of its stronger financial position and its exposure to premium and transatlantic markets.
According to Barclays, the bank believes IAG is taking a cautious stance with a robust balance sheet, giving it room to defend capital spending and potentially act on distressed opportunities.
Ryanair appeals for a different reason.
Its ultra-low-cost model gives it a natural edge when consumers become more price-sensitive.
Barclays argues that industry stress could open up opportunities for the airline to acquire assets more cheaply if failures emerge elsewhere in the market.
But the broker also flagged an important risk: Ryanair has no fuel hedging in place for fiscal 2028, leaving it more exposed if oil prices climb further.
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