Investing.com -- Barclays has revised down its estimates and price targets across the European airline sector, citing a deteriorating outlook for long-haul carriers and a more favorable, albeit still cautious, view on short-haul operators.

The bank notes mixed trends across the industry, with demand on transatlantic routes weakening while low-cost carriers benefit from fuel and currency tailwinds.

The North Atlantic remains Barclays’ primary concern. “Profitability will be abruptly diminished by a simultaneous reduction of demand at each end of the route,” analysts led by Andrew Lobbenberg warned, pointing to a slowdown in corporate and premium leisure travel.

The reversal of the post-pandemic wealth effect, which had previously fueled premium demand, is also expected to weigh on results.

Low-cost carriers, on the other hand, are better positioned to absorb softer demand. Barclays points out that falling fuel prices and a stronger euro-dollar ( EUR/USD ) exchange rate are providing meaningful cost relief.

“After the recent share price drops, we think it is right to be constructive towards Europe’s short haul airlines,” the report said, although Wizz remains an exception due to its aggressive growth plans.

The bank downgraded unit revenue assumptions for both long- and short-haul carriers and reduced cargo revenue estimates. Price targets for most flag carriers were cut, while those for Ryanair Holdings PLC ADR (NASDAQ: RYAAY ) and Norwegian Air Shuttle (OL: NAS ) were raised.

Norwegian stock was also upgraded to Overweight, supported by more favorable fuel and foreign exchange (FX) dynamics and decelerating capacity growth that should support unit revenue trends.

Despite a likely strong showing in Q1—driven by constrained Atlantic capacity and pent-up demand—Barclays emphasized that these results are not reflective of the underlying direction of travel.

Winter capacity reductions have already been announced, and further belt-tightening is expected as the industry braces for a weaker second half.

“Uncertain days but a simple premise of long haul pain and short haul gain,” the analysts concluded.