Citi has argued that Ryanair Holdings PLC's (LSE:RYA) recent underperformance against Europe's legacy airlines is overdone and looks set to reverse.
The bank said shares in the Irish low-cost carrier have lagged those of its full-service European peers by around 15 percentage points so far this year.
That gap opened up during the sector-wide rebound that followed the ceasefire, according to Citi.
The bank has previously set out reasons why legacy carriers should outperform low-cost operators, chiefly more supportive near-term trends in unit revenue, a measure of the money an airline earns per seat flown.
But Citi said that despite those market trends, Ryanair's earnings expectations for the current year have broadly kept pace with the rest of the sector.
The bank expects Ryanair fares to find a more stable footing from the June quarter onwards.
At the same time, Citi sees a risk that yield growth and earnings estimates deteriorate in the second half of 2026 for legacy carriers such as Lufthansa, the German flag carrier.
Yield refers to the average fare an airline collects per passenger per mile flown, a closely watched gauge of pricing power.
Citi also pointed to valuation, noting that Ryanair's premium to the legacy subsector now sits 8% to 10% below its median since 2023.
The bank said a narrowing of that premium against IAG, the owner of British Airways and Iberia, looks justified.
It was less convinced that the same argument holds against the other legacy carriers in the group.
Taken together, Citi said, the case for the recent underperformance reversing is a strong one.
