European air passenger growth slowed to just 0.5% in the second quarter, down from 3.1% in the first, according to RBC Capital Markets, with Spanish airports alone keeping the bank's index in positive territory.
Strip those out and RBC's European air passenger index was down around 1%.
The Canadian bank said the figures confirm the deterioration it first flagged in April, with passenger recovery still running roughly 13% to 14% below the pre-pandemic trend despite volumes reaching about 103.5% of 2019 levels in June.
Traffic between Europe and the US turned negative at -0.6% in the quarter, reversing a 1.6% gain in the first three months of the year.
Fares told a different story, with ARC data showing US dollar pricing accelerating to 8% growth from 6.4%, while the dollar headwind eased to around 2% from 10%.
RBC sees stronger pricing power in long-haul, and singled out International Consolidated Airlines Group SA (LSE:IAG), the owner of British Airways and Iberia, as screening most positively into second-quarter results.
Passenger numbers grew between IAG's home markets and the US, while a Spanish services purchasing managers' index above 50 supports the outlook for Vueling and Iberia.
The bank also rates Ryanair Holdings PLC (LSE:RYA) positively, pointing to leisure and Spanish exposure, best-in-class fuel hedging and net cash.
RBC is more cautious on Wizz Air Holdings PLC (AIM:WIZZ), citing above-average fuel exposure and pricing risks from capacity growth of 25% to 28% in the first half against weak macro indicators.
Lufthansa also draws caution, with RBC arguing consensus numbers do not fully reflect the impact of second-quarter strikes.
Macro signals deteriorated further, with the eurozone services PMI averaging 48 in the second quarter against 51 in the first, pointing to flat passenger growth in the third.
Consumer confidence remained weak across the board and was most negative in the UK, where Barclaycard data showed airline spending down around 9%, a tenth consecutive monthly decline.
The gap between spending and transactions widened to about 4%, implying further falls in average UK fares.
Jet fuel prices in euros rose 85% year on year in the second quarter and remain 50% higher so far in the third, though RBC expects further moderation given forward prices for 2027 and 2028 sit around 7% below spot.
Air cargo was the bright spot, with volumes up around 4% on freight rates roughly 30% higher.
