Here’s why EasyJet share price is retreating

It’s a sad day for European airline companies as their stocks retreated. EasyJet (LON: EZJ) share price plunged by more than 3% while IAG, the parent of British Airways, fell by almost 4%. Similarly, Lufthansa and Wizz Air Holdings retreated by more than 2.3%.

Why airline stocks dropped

EasyJet, Lufthansa, and Wizz Air stock prices retreated as the corporate earnings season started on a somber mood. In a statement, Delta Air Lines, one of the biggest airlines in the world, published results that missed estimates.

The company’s revenue rose by 5.8% to $14.22 billion while its operating income dropped to $1.3 billion. At the same time, while the company is still seeing strong demand, it issued guidance that missed estimates. It expects that its free cash flow will be between $3 billion and $4 billion.

Delta noted that it was being impacted by the ongoing cost of doing business as wages and energy prices rose. Therefore, American and European airline stocks are dropping because of the rising fear of these challenges.

Still, it is worth noting that EasyJet and Delta Air Lines are significantly different types of companies. Delta is a full-service company while EasyJet is a European discount carrier with no presence in the US. As such, operations metrics between the two tend to be highly different.

Crisis in the Middle East

EasyJet stock price also crashed as tensions in the Middle East increased overnight. After weeks of attacking ships at the Red Sea, the US and the UK attacked Houthi rebels. The rebels vowed to strike back while Iran criticized the move.

Another war in the Middle East will have an impact on airline demand and jet oil prices. Indeed, the price of Brent and West Texas Intermediate (WTI) has bounced back this week. Brent rose to $80 while the WTI hit $74.40.

Jet fuel is an important part of the airline industry. Unlike wages, fuel is the most variable part of EasyJet because it is the most difficult one to model.

EZJ chart by TradingView

Finally, EasyJet stock retreated for technical reasons. As shown below, this decline started when the shares hit a high of 535p on Thursday. This was an important level since it was the highest point on May 18th last year. It was a level where the stock failed to move above in 2023.

Therefore, this technical factor means that the decline could be brief. Historically, financial assets tend to pull back after hitting an important resistance level. Besides, it remains comfortably above the 50-day and 100-day moving averages.