An airline that lives or dies on holiday bookings might look like the last place to park your money during an era of expensive fuel and stretched household budgets. Yet there is a long-standing pattern in markets: just as a plane gains lift by flying into the wind, betting on airline recoveries tends to pay best when the mood is darkest. EasyJet, the Luton-based budget carrier, is the latest test case.
By almost every short-term measure, easyJet is the most unloved big airline in Europe. Its shares have fallen 31 per cent this year. The stock now trades at less than 0.8 times book value — a level it has only touched twice before, during Covid and in the wake of the 9/11 attacks. Even rivals are struggling: tour operator Jet2 is down by roughly a fifth, and travel group Tui recently reported a 7 per cent drop in quarterly bookings, with tourists waiting longer than usual before committing to a holiday.
The simplest explanation is that easyJet has been in the wrong slice of the market at the wrong time. Transatlantic flying, especially in premium cabins, has held up reasonably well. So have Europe's flag carriers, which have benefited from Asia-bound travellers rerouting away from the Middle East. None of that helps a carrier whose bread and butter is ferrying budget-conscious holidaymakers to beach and luxury destinations across Europe. Add in soaring fuel costs and weakening economies, and the industry is now thick with talk of mergers or even collapses.
But here is the catch. What easyJet does have is the foundation for a comeback. The company is debt-free — no small feat for an airline, since aircraft are expensive and the industry typically runs on borrowed money. A steady stream of new, more fuel-efficient planes is due by 2030, which should let easyJet carry more passengers at lower cost. Its £2.7 billion market value looks small relative to what the company actually owns, including coveted airport slots at top European cities — slots that bigger rivals would probably be barred from acquiring on competition grounds. If revenue grows the 7 per cent analysts expect, and operating margins recover from today's fuel-squeezed level to the pre-pandemic 10 per cent, easyJet's profit would triple. Today the company's enterprise value is just four times operating profit; in 2019 it was nine.
Some investors are already moving. German billionaire Klaus-Michael Kühne added another 5 per cent stake in Lufthansa this week, building on a 15 per cent position he first took in early 2022, when that airline was still climbing out of its pandemic slump. The pattern is unmistakably contrarian: buy when others are running. For now, airlines look like a darkest-before-dawn proposition, and being early to that view can be lonely. But as the author observes, when selling airline stocks feels like the obvious trade, buying them is often the smarter one.
Europe's most unloved airline has lost nearly a third of its value this year — and that, paradoxically, is exactly why some investors are starting to circle.
EasyJet, the budget British airline famous for ferrying tourists to Mediterranean beaches, has had a brutal year. Its stock is down 31% in 2024, and it now trades at less than 0.8 times its book value — the kind of bargain-bin valuation it last hit during Covid lockdowns and after 9/11.
The article argues that this gloom may itself be the buy signal. Fuel costs are punishing, household budgets are stretched, and rivals like Tui and Jet2 are also struggling. But contrarian investors — including German billionaire Klaus-Michael Kühne, who just bought more Lufthansa shares — are betting that the darkest moment is precisely when airline stocks turn around.
The core idea is contrarian investing: when everyone agrees a stock is doomed, the bad news is already baked into the price, so any mildly good news sends it soaring.
If you've ever booked a £30 flight to Spain, you've used the business model under pressure here. But beyond travel plans, this article is a tiny masterclass in how stock markets actually work: prices reflect mood as much as math, and the most uncomfortable trades — buying when headlines are bleakest — are often the ones that pay. That mindset matters whether you eventually pick a career in finance, run a small business, or just decide when to buy a used car.
Airlines have always been a feast-or-famine industry, and consolidation tends to follow downturns — weak carriers either merge or fold, leaving survivors with more pricing power. Watch for merger talk in European aviation, for whether high oil prices ease, and for whether billionaires like Kühne keep adding to their stakes. If the contrarians are right, today's headlines about doomed airlines will look, in hindsight, like the moment to have bought.