Barclays downgrades easyJet, tags RyanAir as 'top pick'

The market could be expected to take a "cautious" view on the 'temporary' boost to profits from low crude prices. As well, a further de-rating across the sector was likely as capacity inevitably crept higher, Barclays European Transportation team said.

Nevertheless, the boon for those companies was so large that it was physically impossible for the industry to add sufficient capacity to "compete away" the fuel savings that would result over a two to three year horizon.

"With a robust economy, demand appears relatively stable (barring further geopolitical incidents, probably the greatest short-term risk to the sector), Barclays analysts Oliver Sleuth, MarkMcVicar and Rishika Savjani said in a research note sent to clients.

In turn, they estimated that would translate into up to 50% upside to estimates for profits from the analyst consensus.

Against that fundamental backdrop, their preferred carrier was RyanAir - which it tagged as their 'top pick' and IAG.

Easyjet on the other hand was taken down a notch to 'equalweight' while Air-France-KLM was bumped up to 'equalweight'.

Their analysis was premised on oil at $50 per barrel in both 2016 and 2017, equating to a 10-15% fall in the operating expenditures of the typical European airlines versus 2014.

Barclays lowered its target price on shares of Easyjet from 1,940p to 1,870p.

IAG and WizzAir were kept at 'overweight' with an unchanged target of 750p for the former, while the target on the stock of the latter was hiked from 1,950p to 2,100p.