European Airlines: Fuel eases, summer back on: Q2 2026 preview

Research evidence excerpt

European Airlines: Fuel eases, summer back on: Q2 2026 preview

7 July 2026

European Airlines

European Airlines: Fuel eases, summer back on (Q2 2026 preview)

Q2 reporting is likely to see airline management teams out of crisis mode and with a more Alex Irving, CFA

+44 20 7676 7044 optimistic outlook for the rest of the year. Fuel prices have eased, sticking below $1,000, as

alex.irving@bernsteinsg.com the peace deal between Iran and the US looks to be holding. That provides relief on airlines’

most important input cost; however it also reduces the likelihood of winter capacity cuts

Antoine Madre in our view. Our preferred names into Q2 are IAG, where we are 7% ahead on EBIT, and

+33 1 58 98 74 52

antoine.madre@bernsteinsg.com Ryanair, where we are 4% ahead on net income.

Fuel risks easing. At the start of Q2, fuel prices were above $1,500 per metric ton,

threatening airline earnings — and even the going concern nature of the continent’s

weakest carriers. These have since revered course meaningfully: spot jet fuel is just under

$1,000, and forward curves indicate prices returning to a much more normal c. $800

during 2027. While this is marginally higher than the medium-term forward price before the

war, it represents a level that airlines can afford and adjust to.

Capacity cuts become less likely into winter. Until the peace deal and move lower in

fuel prices, we had expected significant capacity cuts into winter in an effort to protect

contribution margins, and a meaningful probability of sector bankruptcies. That now looks

much less likely, and capacity growth looks more likely to remain positive. That will likely

reduce the yield uplift that airlines could have otherwise hoped for, but equally without the

painful increase in the most important input cost.