Legacy European airlines are trimming their summer schedules more aggressively as elevated fuel prices broaden the scope of network cuts, though Citi said the adjustments remain small enough to support near-term pricing power.
The broker said early summer 2026 growth on legacy carrier networks remains minimal, ranging from a 0.1% decline to a 0.7% increase in the second quarter, accelerating to growth of between 1.6% and 4.7% in the third quarter.
Capacity reductions have been most pronounced on routes between Europe and the Middle East and Africa, where month-on-month cuts of between 2.2 and 5.2 percentage points have been recorded.
However, Citi noted the cuts are now broadening to include North and South Atlantic routes for International Consolidated Airlines Group SA (LSE:IAG) and Air France-KLM, each down roughly one percentage point month on month, and intra-European services for Lufthansa, down 1.6 percentage points.
If fuel prices remain elevated, Citi expects this broadening to continue through the summer, though at a low single-digit percentage magnitude as adjustments remain predominantly driven by aircraft utilisation rather than structural network changes.
The broker said the capacity environment, combined with still-resilient demand for premium travel, is supportive of near-term unit revenue trends across legacy carriers.
Within the group, Citi identified IAG, the owner of British Airways, Iberia and Aer Lingus, as by far the best positioned to weather current challenges.
The broker estimates IAG's full-year 2026 operating profit will decline 13% year on year, a considerably shallower fall than the 19% drop forecast for Lufthansa and 31% decline expected at Air France-KLM, even using what Citi described as conservative pricing assumptions.
On valuation, IAG trades at 4.8 times two-year forward EV/EBIT, which Citi said represents the most normalised margin view, compared with 7.6 times for Lufthansa and 8.4 times for Air France-KLM.
That gap offers considerable relative value for IAG investors, according to the broker, at a time when the airline sector is navigating a difficult fuel cost environment while benefiting from disciplined capacity management.