Bank of America Securities has named Ryanair and International Airlines Group (IAG) as its top airline picks, citing Apollo Global Management's bid for easyJet as a potential catalyst for a long-awaited consolidation wave across Europe's fragmented aviation sector.
In a research note published Wednesday, BofA argued that private-equity interest in the sector could compress valuation gaps between public and private airlines by better reflecting the scarcity value of fleet assets, landing slots, orderbooks and scaled platforms. The bank said that would support higher sector multiples.
"Apollo's move shifts the industry focus from capacity growth to returns discipline," BofA wrote. "That dynamic favors operators with scarce fleets, slots and orderbooks — the qualities that underpin our top picks."
Europe remains far less consolidated than the United States, according to BofA's analysis. The four largest U.S. carriers control roughly 80% of domestic capacity, while smaller European airlines still hold about one-third of intra-European capacity. However, the bank noted that the European market is moving gradually toward the more concentrated U.S. structure over time.
Ryanair was rated Buy and identified as BofA's strongest pick for benefiting from European consolidation and gaining market share. The bank acknowledged that Ryanair overlaps with easyJet on somewhat more routes than Jet2, but said those shared routes account for only about 13% of Ryanair's larger network, limiting its direct exposure to any changes in easyJet's route map.
IAG was also flagged among BofA's top European airline selections, though the note did not assign a specific rating in the excerpted material.
The research arrives against a backdrop in which European airlines have long lagged their U.S. peers in industry consolidation, despite repeated speculation that rising costs, slot constraints and competitive pressure would eventually force further M&A.
