Here’s why the EasyJet and IAG share prices are sinking

Airline stocks listed on the London Stock Exchange (LSE) have tumbled this week. International Consolidated Airline (LON: IAG) and EasyJet (LON: EZJ) shares have crashed to their lowest levels in weeks. IAG has moved into a technical correction as it dropped by 12% from its highest level this year. It is hovering at its lowest point since June 2nd.

Meanwhile, EasyJet’s stock has plummeted to 425p, its lowest point since November 2023. Unlike IAG, EZJ has moved into a bear market as it dropped by over 24% from its highest point this year. Other airline stocks like Wizz Air and Ryanair have also plummeted. 

Weak airlines earnings

The main reason why these stocks have crashed hard is that several airlines have published weak financial results as the earnings season gets underway.

Delta Air Lines, the biggest airline in the United States, said that its profit came in at $1.31 billion in the second quarter, down by 29% from the same period in 2023. Its earnings per share of $2.36 was worse than expected. 

In a statement, the company lamented that the industry was getting highly competitive, which has affected its pricing. Also, it expressed concerns that the holiday season has been weaker than expected. Ed Bastian, the CEO said:

“We see the industry already taking pretty significant corrective action by pulling capacity down. And we expect by the end of August, we’ll have that back in balance.”

Ryanair weak earnings and guidance

The EasyJet and IAG share prices continued their downtrend after Ryanair, the biggest regional carrier in the industry, reported weak financial results. Its load factor dropped slightly to 94% in the first quarter. 

Its customer count increased by 10% to 55.5 million while the average fare retreated by 15% to €41.93. As a result, its profit after tax dropped by 46% to €360 million in the quarter.

Like Delta, the company warned that its summer bookings were relatively weaker than expected, which explains why the stock fell by 11% on Monday. Still, Ryanair expects that its business will maintain its vibrance as companies continue their A320’s Pratt & Whitney engines. It said:

“​​These capacity constraints, combined with our significant unit cost advantage, a strong balance sheet, low-cost aircraft orders and industry leading OTP, will underpin a decade of low-fare profitable growth to 300m passengers by FY34. “

Impact on EasyJet and IAG

Therefore, the IAG and EasyJet share prices nosedived because investors anticipate that they too are impacted. EasyJet, in particular, is exposed to the Airbus A320 challenges that could affect its business this year. 

The most recent results showed that EasyJet made a loss of £320 million in the first half of the year. It expects that its next results, scheduled on Wednesday this week, will show that revenue rose in the last quarter. It expects to deliver a £1 billion profit before tax of over £1 billion. 

IAG could be more immune to Delta and Ryanair woes because of its dependence on business and transatlantic travel that has done well in the past few months. IAG will publish its next financial results on August 2nd.

EasyJet share price analysis

EasyJet chart by TradingView

The daily chart shows that the EZJ stock price peaked at 591p earlier this year and has crashed to about 420p. It formed a big down-gap on Monday after Ryanair’s weak financial results. As it dropped, the stock moved below the key support level at 428.6p, its lowest point on June 20th. 

It has also dropped below the 61.8% Fibonacci Retracement point and the 50-day and 100-day moving averages. Therefore, the stock’s outlook is bearish, with the next point to watch being at 400p. However, a stock can show some volatility after its earnings, which could see it fill the down gap as buyers target the key resistance level at 450p.

IAG stock price analysis

IAG chart by TradingView

Like EasyJet, the IAG stock price peaked at 187.50p in May and has now moved into a correction as it fell to 164p. It has dropped in the past four straight days and is now trading at its lowest point on July 2nd.

The stock also retreated below the important support point at 172.85p, its highest swing in August last year. Fortunately, it has found some support at the 200-day moving average, where it has failed to drop below two times since June 28th. 

The Relative Strength Index (RSI) has moved below the neutral point at 50. Therefore, the stock will likely remain on edge in the next few weeks as investors watch other airline earnings. In this case, the key support level to watch will be at 160p, its lowest point on June 28th. 

The next key airline earnings to watch will be American Airlines Group (July 25th), JetBlue Airways (July 30th), and Allegiant Travel (July 31st).