British Airways parent International Consolidated Airlines Group SA (LSE:IAG) might be in the best position amongst its peers, according to analysts at JP Morgan, who repeated an 'overweight' rating.
The broker said its outlook for the sector remains selective as capacity growth diverges among European flag carriers.
IAG also stands out on valuation and cash returns, JPMorgan highlighted, noting stronger free cash flow generation and its greater scope to return capital to shareholders.
Analyst Harry J Gowers said IAG faces the lowest risk of overcapacity on its routes, with transatlantic capacity still constrained.
The UK-US market, IAG’s largest profit pool, continues to show strength. In contrast, Lufthansa’s passenger volumes into the US remain weak.
JP has an 'underweight' rating for Lufthansa, and has a neutral position on Air France-KLM.
The American bank, meanwhile, warned that pricing trends in the sector are likely to decelerate in the second half of the year, particularly as transatlantic fares soften into the third quarter.