Key Takeaways
- Europe’s airline stocks look set to continue a bumpy ride in 2026 as higher jet fuel costs weigh on margins.
- Some airline stocks have fallen by double digits as jet fuel costs doubled since the start of the Iran war.
- Analysts warn that carriers with limited hedges against rising fuel prices will be hardest hit.
Europe’s airline stocks face continued turbulence as higher jet fuel costs and route disruptions associated with the Iran war threaten to weigh on lucrative summer travel demand, with the impact predicted to hit from next month.
Shares of major players Wizz Air WIZZ, EasyJet EZJ, and Air France-KLM AF have fallen more than 14% since the start of the war. And ACI Europe, which represents EU airports, raised the alarm last week that European airports look set to face “systemic” jet fuel shortages if key energy gateway the Strait of Hormuz is not fully reopened within the next three weeks.
“If the energy disruptions continue, then we expect to see reductions in airline capacity as they look to limit unprofitable flights and rationalize their offerings in the face of mounting fuel costs, likely from May onwards,” says George Shaw, senior analyst at trade-intelligence firm Kpler.
The jet-fuel challenge to airline operations and margins comes as Europe and the wider northern hemisphere is entering the peak summer travel season, and what are usually the most profitable months of the year for airlines. When it comes to how individual airlines will navigate the surge in fuel costs, analysts point to variations in how companies protect against price increases through hedges that employ futures and options contracts.
European Jet Fuel Costs Almost Double Since Iran War
European jet fuel prices have more than doubled since the start of the Iran war, as refining disruptions have reduced supplies. Benchmark north-west European prices for jet fuel closed at USD 1,510 per tonne on Tuesday, up from about USD 750 per tonne before the war, according to price reporting agency Argus Media.
“We’ve never seen a spike in the jet fuel price as we saw in March,” independent aviation analyst Hans Joergen Elnaes says. “The main concern is how will the high price affect airlines’ pricing power and how they will reduce their costs.”
The International Air Transport Association forecast in December that airlines’ net profit per passenger would hold steady at USD 7.90 in 2026. However, last month’s price spike has already eradicated that margin, according to Joergen Elnaes, who estimates that higher fuel costs have added around EUR 40 per passenger for a short- to medium-haul European flight, and around EUR 250 per passenger for a long-haul route, such as London to the US.
“There’s a big imbalance because the cost has gone up so much,” he says. “There is a need for some action here by the airlines. We all know the summer period is when the airlines make their money. So if production is down, it’s not good for business.”
European Airline Stocks Fall as Jet Fuel Prices Surge
Shares of European airlines have tumbled since the start of the Iran war on Feb. 27, as carriers scaled back routes to and through the Middle East. Even tentative gains on last week’s ceasefire deal later gave way to concerns over continued disruptions in the Strait of Hormuz.
Some airlines, chiefly in Asia and the US, have begun cutting routes and hiking prices as higher jet fuel costs have made services more costly, and in some cases, unprofitable. Fuel typically accounts for around a quarter of airlines’ operating costs, according to Kpler.
European carriers have so far been more insulated from price rises given their tendency to hedge fuel costs, thereby locking in prices ahead of time. However, as Kpler notes, most hedging programs are structured based on crude oil prices, rather than jet fuel costs. With the spread between the two having widened lately, some airlines may be “under-hedged” to the true cost driver.
“If Brent remains above USD 100 per barrel, the impact on airlines with low hedge coverage would be material,” Morningstar analyst Loredana Muharremi says.
Which Airlines Are Most Exposed to Rising Jet Fuel Costs?
Ryanair’s RYA leading hedging position leaves it better placed than rivals to deal with energy price shocks, with around 80% of its 2026 fuel already hedged, according to Morningstar’s Muharremi.
On the other end, Wizz Air with only 55% fuel hedged for this year looks most exposed, followed by Lufthansa and Air France-KLM, she notes.
“Higher-margin airlines, namely Ryanair and IAG, are also better positioned to absorb fuel shocks and potential gain share, if weaker competitors raise fares,” Muharremi adds.
Wealth manager Raymond James takes a similar stance, citing Ryanair as “best positioned” followed by Air France-KLM, IAG IAG and Lufthansa LHA.
Both Ryanair and IAG’s strong fuel hedges, solid margins and balance sheets, plus their relatively lower exposure to the Middle East leave them better placed than many competitors, Raymond James analysts Savanthi Syth and Carter Eades write.
Still, Joergen Elnaes warns that small- and medium-sized regional airlines with limited hedging capacity are likely to be worst hit, with higher jet fuel costs historically a major driver of industry consolidation. “I will not be very surprised if we will see both M&A and [companies going] out of business during 2026/27,” he notes.
A Long Tail of Disruption for Airlines
European airlines’ quarterly results, due from later this month, will give a read on the impact of the war. EasyJet, Wizz Air and Air France-KLM have all said that they are not currently seeing meaningful disruption to fuel supplies, but that they are continuing to monitor the situation.
Wizz Air nevertheless last month cut its fiscal year 2026 net profit guide by EUR 50 million, due to scheduled cuts to the Middle East region and wider macroeconomic impacts, including higher fuel costs.
Ryanair has said that its fuel suppliers are currently guaranteeing supply until mid- to late May, but noted that if the closure of the Strait of Hormuz extends into May or June, it “cannot rule out risks to fuel supplies at some airports in Europe.”
It added that it and other airlines could be expected to raise passenger fares from now on. Europe’s biggest airlines are now calling for measures to ease the impact of the war, including scrapping aviation taxes and monitoring jet fuel availability.
How Long Will the Jet Fuel Disruption Last?
Regardless of the course of the conflict, however, analysts warn that there is likely to be a long tail of disruption ahead for Europe’s airlines.
“Even in an extremely optimistic scenario where the Strait of Hormuz is reopened to free navigation tomorrow, journey times to demand centers, and the damage to energy infrastructure, such as refineries and terminals, will lead to a staggered resumption of global jet supply that will take months to get back to pre-war levels,” Kepler’s Shaw notes.
“As such, high jet fuel costs are likely to persist into the summer and a return to pre-war price levels would seem to be very off currently,” he adds.
Joergen Elnaes forecasts that production disruption could potentially keep prices higher through the rest of the year.
Morningstar nevertheless says it views the disruption as logistical rather than structural, and maintains its midcycle Brent assumption of USD 65 per barrel over a three-year horizon, barring any further severe supply shocks.
