Skip to content

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

Investing in airlines: what are the top airline stocks?

The airline industry has been decimated by the coronavirus pandemic and it will take years to recover. Will Lufthansa, Ryanair, IAG, Air France and easyJet be able to survive?

Video poster image

How has the coronavirus impacted the airline industry?

The coronavirus pandemic and government lockdown measures has brought global air travel to a virtual standstill over recent months. Global air travel was down 94% year-on-year (YoY) in April as most countries introduced bans and people stayed at home. The amount people travelling right now is on par with 1990, reflecting a setback of two decades.

Airlines have tried to cut capacity but simply haven’t been able to reduce it as fast as demand. Load factors have plunged, and airlines can’t make money in the current climate. The industry hopes the worst is behind it as countries begin to ease lockdown measures and travel bans.

But the new world of travel looks very different to the last. Governments and the industry will be hoping ‘air bridges’ and mutual recognition between countries can minimise disruption and encourage people to travel again by removing the threat of quarantine, either on arrival or when they return. Airlines will have to deal with a swathe of new measures so people can travel safely, including operating at reduced capacity, which does nothing to help profitability.

It will be a very slow recovery for the industry and, although there is hope that this has started, there is still the threat of a second wave of infections and countries re-entering lockdown and, even if that can be avoided, they will have to deal with the subsequent recession.

Read about how to trade coronavirus volatility

How will the airline industry perform in 2020?

It will be a dire year for the airline industry. ‘Financially, 2020 will go down as the worst year in the history of aviation,’ the International Air Transport Association (IATA), the trade body for the global industry, said in June.

IATA forecasts that airlines will see revenue fall to $419 billion in 2020, just half the $838 billion booked in 2019 before the pandemic broke out. Revenues that come directly from ferrying passengers will experience an even steeper fall of over 60% to $241 billion from $612 billion. July is seen as a crucial month for the airline industry to restart and demand is expected to gradually improve throughout the year, but traffic will still be down 55% this year.

Although the industry has received government support and tried to cut costs, they can’t match the decline in income, and this will plunge airlines to deep losses this year. The accumulative net loss is expected to be over $84 billion.

The oversupply and lack of demand means airlines will have to fight for customers this year, and this will be done through pricing. Airline fares could drop to new record lows once travel resumes as companies desperately try to fill seats, and that should see average ticket prices plunge as much as 20% in 2020.

This will compound the effect of the higher costs and lost income coming from safety measures such as additional cleaning and social distancing. IATA forecasts airlines will lose an average of $37 per customer this year.

The first area to recover will be domestic and regional flights but international, long-haul travel isn’t expected to pick up again until the fourth quarter. For perspective, domestic travel accounts for about 36% of the global market with the other 64% made up of international flights.

The eagerness to get the airline industry back up and running is understandable. Governments, especially in North America and Europe, have ploughed a total of $123 billion into the industry since the coronavirus pandemic emerged, and many are currently paying the wages of the millions of people employed by the sector.

For airlines, there are steep costs for everyday they aren’t flying. IATA believes that, on average, the airline industry will burn through a staggering $230 million in cash each day this year. That will amount to a cash burn of $61 billion in the three months to the end of June alone.

How will the airline industry perform in 2021?

Assuming the industry is allowed to recover throughout the rest of this year, 2021 will be a marked improvement compared to 2020 but still far from reassuring. Passenger numbers are expected to bounce back to 3.4 billion in 2021 – which is much higher than the 2.3 billion expected in 2020 but still well below the 4.5 billion passengers that flew in 2019.

That will result in a similar pattern to revenue, which is expected to rise 42% from 2020 to $598 billion in 2021, but still well below the $838 billion reported in 2019. Costs will be more under control by next year.

For example, many staff will lose their jobs once furlough and other support schemes come to an end. IATA reckons the industry will employ just 38 million people by the end of 2020, compared to over 70 million at present. Still, while costs and demand should both improve relative to this year, they are expected to lose around $5 per passenger in 2021 and continue to burn through cash, albeit at reduced rates. IATA forecasts industry losses will be cut to $15.8 billion in 2021.

Airline industry will be saddled with debt when market does take off again

The airline industry entered 2020 in fairly good shape. Profits had been rising for a decade and airlines had begun to pay down their debt piles. The industry had around $430 billion worth of debt, equal to about half of their annual revenues. But most of the industry still had more debt than what was considered desirable.

All of that progress has now been lost and debt piles have exploded. Airlines have had no choice but to rely on banks and government aid to stay afloat, but most of this will have to be paid back at some point. For example, of the $123 billion dished out by governments around the world to their airline industries, over $70 billion will have to be repaid.

The level of support provided by governments has varied. The US has been the most generous, supplying aide equal to 25% of the US airline industry’s annual revenue, followed by Europe which has provided support equal to 15%.

All-in-all, the industry is expected to end this year with $550 billion worth of debt. The huge rise in borrowings combined with lower demand and profitability will mean the industry’s debt will go from being about 5x adjusted earnings to over 15x, according to IATA.

Having said that, balance sheet strength varies wildly depending on size – and larger airlines are much more financially fit than smaller players. Only about 30 of the hundreds of commercial airlines were driving improvements in the market before the pandemic, and their debt levels were considerably lower. The top 30 airlines were posting an average net debt to adjusted earnings ratio of 2.2x to 2.3x before the pandemic, whilst the whole industry was closer to 6x.

Once the industry begins to stabilise itself again, it will be tasked with generating the vast amounts of cash it will need to repay the debt it has relied on to survive the crisis, which will hamper the return of dividends or buybacks.

Will a recession or a lack of consumer confidence hinder a recovery?

In addition to the threat of the coronavirus flaring up again, the airline industry will also have to try and recover when many countries will be in post-virus recessions and consumers are fearful about travelling by plane or going abroad.

The performance of the airline industry is heavily linked to the performance of the economy, so a recession will only slow down the pace of recovery. There may be an initial burst of demand when airlines resume flights, but this is not expected to last over the long term.

Plus, airlines will have to convince passengers that it is safe to travel. Many consumers won’t feel comfortable flying or going to another country whilst the virus is still around. Data from IATA suggests up to 40% of people will still not be comfortable travelling soon after the pandemic is under control.

Top airline stocks to watch

  1. easyJet
  2. IAG
  3. Lufthansa
  4. Ryanair
  5. Air France-KLM


easyJet is a low-cost airline that offers point-to-point routes across Europe. It is either the number one or number two provider on most of the routes it offers, and says its ‘industry-leading network, serving primary airports, provides a customer offering that cannot be matched by any other airline’. Its network twinned with low prices should go in its favour as the industry recovers.

The company raised £419 million by selling a 15% chunk of the business through a placing priced at 703 pence in June, giving it somewhere in the region of £2.8 billion in cash. It is in a net debt position of £467 million, but it doesn’t need to refinance anything until 2022, when the industry should be in a better position. It is one of the few to boast an investment grade balance sheet going into the crisis.

The airline began to tentatively restart operations, mostly domestic flights, in the middle of June and says it will gradually ramp-up through the summer. Plus, it says that bookings for its holiday arm have been ‘encouraging’. Still, it only expects to be running at 30% its usual capacity by September.

‘easyJet believes that the levels of market demand seen in 2019 are not likely to be reached again until 2023. As a low-cost airline with a strong network, we believe we are well placed to benefit from customers seeking great value during that recovery period,’ said the airline. This has prompted easyJet to take drastic action by announcing it will be cutting up to 30% of its workforce and closing some of its UK sites.

Find out how to buy, sell and short easyJet shares


IAG is the owner of several airlines that offer different propositions to flyers. Its premium airlines are British Airways and Iberia, its ‘value’ brands are Aer Lingus and Iberia Express, and Vueling and LEVEL offer low-cost flights.

IAG already boasted one of the stronger balance sheets going into the crisis and has cancelled its dividend to give it further flexibility. It has almost €7 billion in cash and €10 billion in overall liquidity, and that should be enough to see it through the crisis considering it has more than halved its monthly cash burn to nearly €200 million.

Still, IAG is undertaking a major restructuring because it knows business will be tough for at least the next four years. Most of the changes will happen at British Airways, where up to 12,000 employees – around half of the total of BA staff currently furloughed – could be made redundant. ‘IAG does not expect the level of passenger demand in 2019 to recover before 2023, making further group-wide restructuring measures essential,’ it said.

The airline plans to restart operations in July and says overall capacity will be down around 50% in 2020 compared to last year.

Find out how to buy, sell and short IAG shares


Lufthansa is a German airline with multiple brands spanning Europe. It has a number of network airlines offering a premium service to customers including Lufthansa German, SWISS and Austrian Airlines and its low-cost Eurowings brands. This gives it exposure to both ends of the market, although its network airlines generate over 60% of revenue compared to just 12% from Eurowings.

Lufthansa has been one of the biggest beneficiaries of state aid after it secured a €9 billion package from the German government in return for a 20% stake in the business. The package, which was approved by the European Commission, guarantees Lufthansa will survive the crisis as it ‘secures the solvency of the company until it is able to generate sufficient funds from its own resources’. Those funds are on top of the €4.3 billion in existing liquidity, although it is still burning through around €800 million per month.

‘We at Lufthansa are aware of our responsibility to pay back the up to €9 billion to the taxpayers as quickly as possible,’ the company said. ‘In order to repay the loans and coupons quickly, we will have to significantly increase our annual free cash flow compared to pre-crisis levels - even though global demand for flights will remain below pre-crisis levels for years to come.’

Lufthansa has started to radically restructure the business to achieve this. New projects, unessential maintenance, and investment have all ceased, the dividend has been suspended, and it has postponed delivery of new aircraft while introducing plans to make deep job cuts and ultimately become a smaller business.

Brussels Airlines will cut its fleet by 30% and its workforce by 25%, while Austrian Airlines will shed 20% of both. Lufthansa said it ‘still expects 300 aircraft parked in 2021, and 200 in 2022’, adding that is fleet will remain around 100 fewer in number even after the crisis has ended.

Lufthansa’s initial strategy is to offer as many of its routes as possible to give consumers the widest possible choice – something it can do in the knowledge that it has sustained backing from the government. Still, it only expects to be running at about 40% usual capacity by September.

Shareholder payouts will remain off the table until the debt is paid back, and although Lufthansa has a strategy it will be difficult to boost cashflow over the next few years. ‘We at Lufthansa are aware of our responsibility to pay back the up to €9 billion to the taxpayers as quickly as possible,’ said the company.


Ryanair is the pioneer of low-cost, short-haul flights within Europe and its success has been largely down to its no-frills service that has allowed it to keep costs down. Ryanair’s relentless focus on costs should place it in a good position to recover relative to more expensive rivals, and its balance sheet is in good condition.

It has ‘one of the strongest balance sheets in the industry’ with over €4 billion of gross cash (although it is in a net debt position), and 330 planes that it could secure against new debt if it needed to.

Ryanair has been the biggest critic of the billions spent by governments on propping up their national airlines. The company has not taken any state aide and doesn’t intend to, but it has called the state aide given to European rivals as ‘unlawful and discriminatory’ and is challenging it in court. It claims the money will simply allow inefficient airlines to subsidise prices over the coming years, putting itself and others at a disadvantage.

‘The level playing field will be distorted by competing against legacy airlines who are receiving over €30 billion of state aid, in clear breach of both EU competition and state aid rules,’ said Ryanair.

Ryanair says it will be reopening nine out of everyten routes it offers as it restarts in July, but says it will only be operating at around 40% of its usual capacity. After years of consistent growth, Ryanair expects to carry less than 80 million passengers in the financial year to the end of March 2021, considerably less than its original 154 million target.

Ryanair says passenger demand won’t fully recover until the summer of 2022 ‘at the earliest’. However, its relentless focus on price and costs should favour the business when it comes to competing for customers.

Ryanair does not pay an ordinary dividend, but it does make special payouts when the bank balance allows it. This will give it more financial flexibility in these testing times, but investors are unlikely to be offered that in the foreseeable future. ‘Our focus will remain on cash preservation/generation and the repayment of maturing debt over the next 24 months,’ said Ryanair.

Air France-KLM

Air France offers more routes out of Europe than any other airline in the region, flying to more than 100 countries through its brands Air France, KLM Royal Dutch Airlines and Transavia. The airline is backed by the French government, which owns a 14.3% stake, and the Dutch government, which owns 14.0%.

Government backing has proven vital during this crisis. It warned it needed to raise significant cash if it was to survive the year and fortunately it has secured €7 billion in loans from the French government and another €3.4 billion from the Dutch government. These will have to be paid back within the next one to four years, and Air France has vowed not to pay any dividends until it has. That means shareholder returns are off the table for the foreseeable future. Although it desperately needed cash this was more to fund its hefty investment plans and cash burn rather than a huge debt pile, which remains relatively small compared to other airlines.

It expects a slow return to service and says it will only be running at 20% usual capacity in the third quarter of 2020 compared to just 5% in the second. Air France said its fleet will still be 20% smaller at the end of the crisis compared to 2019 levels.

Who will be the winners in the European airline market?

The crisis has split airline stocks into two categories: those that have prioritised financial strength and those that have favoured shareholder payouts. Ryanair has sensibly opted for a flexible approach and boasts a much stronger balance sheet compared to the likes of Lufthansa and Air France, which have had their weaker balance sheets exposed after years of dishing out payouts to investors.

State-backing has proven vital for the likes of Lufthansa and Air France, but this has loaded them up with even more debt. Although others have used government support schemes, such as putting staff on furlough, they have not received anywhere near the same level of state support, but they still look much stronger as a result.

The next few years will all be about generating cash and servicing the additional debt the industry must rely on to survive the crisis. Diverse routes and cheap prices will be key to responding to national lockdowns or flare ups, and to win over price-conscious consumers in a world that is steamrolling toward a recession. Still, the fundamentals are strong for a long-term recovery and the larger players, state-backed or not, are in the best position to capitalise as the coronavirus wanes and lockdown eases.

Brokers have mixed views on the Big Five European airline stocks. Heavily indebted Lufthansa and Air France are seen as over-valued, while the ratings toward Ryanair, IAG and easyJet are much more favourable with all of them offering potential upside compared to their average target prices.

Airline stocks to watch: the need to knows

Broker Ratings (01/07/2020) Broker Rating Target price Share price Potential upside
Lufthansa Strong Sell €5.83 €8.71 -33%
Ryanair Buy €13.05 €10.54 24%
IAG Buy £3.98 £2.17 83%
Air France-KLM Sell €4.18 €4.04 3.50%
easyJet Hold £8.50 £6.70 27%

(Source: S&P Global Market Intelligence)

How to trade airline stocks

With IG, you can trade on the best trading platform and back whether you think shares will rise or fall in value. Go long (buy) if you think they will increase in value, or go short (sell) if you think they will decrease in value.

To take a position, follow these simple steps:

  1. Create an IG trading account or log in to your existing account
  2. Type the name of the airline stock in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

You can also invest by buying shares in any of these airline stocks on IG’s share dealing platform. This means you must pay the full amount and cannot use leverage, but you will own the shares outright and be entitled to any dividends or special payouts that are made in the future.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Discover how to trade the markets

Explore the range of markets you can trade – and learn how they work – with IG Academy's free ’introducing the financial markets’ course.

What is the number one mistake traders make?

We reveal the top potential pitfall and how to avoid it. Discover how to increase your chances of trading success, with data gleaned from over 100,00 IG accounts.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.