UK budget airline easyJet is now the most attractive investment opportunity in the European airline space after a broad sector sell-off triggered by the Middle East conflict, according to research from Citigroup.
Citi said the carrier’s valuation has fallen to levels not seen since the 2008 global financial crisis, with its price-to-book ratio, an indicator comparing market value to net assets, signalling “extreme stress” and suggesting much of the negative outlook is already priced in.
The bank noted that recent consumer spending data from Barclaycard points to weaker demand across major UK airlines over the past six months. However, it said this deterioration has been absorbed by investors and already reflected in positioning and valuations.
While Citi acknowledged further downside risk, it characterised it as limited relative to the potential upside. In a worst-case scenario based on historical downturns, including 2004 and the Covid-19 crash in 2020, the bank estimates 22% to 26% downside remains possible.
By contrast, a recovery in easyJet’s valuation toward its long-term average price-to-book multiple could deliver around 74% upside from current levels.
Citi said such a re-rating would require the airline to generate a return on equity of about 13.4%, slightly below the roughly 15% it achieved between its 2022 and 2025 financial years.
Even under more conservative assumptions, Citi sees significant upside. Its price target, already discounted to reflect weaker expected cash generation through to 2030, still implies around 36% upside for the shares.
The analysis suggests that despite ongoing concerns over consumer demand, easyJet’s current valuation offers a favourable risk-reward profile relative to peers in the European airline sector.