Rally Against the Consensus: Why Wizz Air and Lufthansa Could Become Europe’s Biggest Airline Surprises — and Why Wizz Air Might Repeat easyJet’s Story

European airline stocks are extending their rally despite continued skepticism from Wall Street. At the time of writing, Wizz Air shares are up 3.7%, while Deutsche Lufthansa has gained 1.7%, making both among the sector's strongest performers.

Despite the rebound, Citi continues to rank both airlines among its most bearish calls in European aviation. Yet the market appears to be questioning one of this year's strongest bearish consensus trades.

The shift is being driven by a more favorable backdrop. Oil prices have fallen over the past two days, while easing geopolitical tensions in the Middle East have reduced concerns over potential disruptions in the Strait of Hormuz. Lower fuel costs could significantly improve airline margins after months of pressure.

Wizz Air: Too Much Bad News Already Priced In

Wizz Air has spent months under pressure from Pratt & Whitney engine inspections, higher fuel costs and weaker yields. Despite reporting a quarterly loss, management maintained its fleet expansion plans, signaling confidence in long-term demand.

When expectations are this low, even modest improvements can trigger a sharp re-rating. The setup is made even more compelling by the stock's exceptionally high short interest.

Lufthansa: A Higher-Quality Recovery Story

Lufthansa has also been heavily shorted following its profit warning. However, investors may be overlooking the strength of its diversified business. In addition to passenger operations, Lufthansa Technik and Lufthansa Cargo continue to provide meaningful earnings support.

With fuel prices easing, the market may begin reassessing the company's earnings potential.

Andrievskii Verdict

The market appears to be reassessing its main bearish thesis on European airlines. Just weeks ago, expensive oil and margin pressure were the dominant reasons to avoid the sector. That argument is gradually losing momentum.

Investors should also remember easyJet's recent experience. In mid-May, its shares traded near 340 pence. Just a few months later, the market was valuing the airline based on Apollo's 715-pence-per-share proposal—a reminder of how quickly airline valuations can change once sentiment shifts.

This does not mean Wizz Air is about to become a takeover target. It does, however, illustrate how rapidly investors can reprice a deeply discounted airline once fundamentals begin improving.

The facts supporting Wizz Air are increasingly difficult to ignore:

·       Short interest stands at roughly 11.5% of free float, one of the highest levels among European airlines.

·       While many investors remain bearish, non-executive director Stephen Johnson recently purchased 15,000 shares worth nearly £160,000, increasing his personal stake.

·       The company also holds more than €2 billion in cash and cash equivalents, despite a market capitalization of just over €1 billion. Although cash should not be compared directly with market value because of debt and lease liabilities, this liquidity provides a substantial financial cushion.

Taken together, these factors create an unusual setup. Improving fundamentals are emerging precisely when bearish positioning remains exceptionally crowded. If oil prices continue to ease and positive news flow persists, Wizz Air could become one of Europe's most significant re-rating stories—and heavy short positioning could amplify the move through a classic short squeeze.

Lufthansa, meanwhile, represents a more conservative recovery play as lower fuel costs and its diversified business model support a gradual improvement in profitability.

Aleksei Andrievskii | Advisory Board Member, Bendura Bank AG | Liechtenstein