British Airways owner IAG was a faller on Monday after Merrill Lynch advised ditching long-haul airlines. Europe’s flag-carriers have been outperforming short-haul airlines thanks to tight transatlantic capacity and “growth capitulation” among the Middle East operators, said Merrill. IAG is up 20% since the start of the year while easyJet is little changed. However, investor sentiment is likely to sour as corporate travel demand is faltering, particularly from the financial services companies, said Merrill. Meanwhile, both north Atlantic and Europe-to-Asia routes are seeing a return of capacity growth and the leisure market is suffering due to expansion by new entrants including Norwegian Air Shuttle, Merrill argued. It cut IAG to “underperform” with a 500p target, sending the shares sliding 2.9 per cent to 533.5p. On easyJet, up 0.7% to GBP10.12, Merrill maintained “neutral” advice. Investor interest “can only be stimulated by management change or a capitulation on easyJet’s illogical capacity growth plans”, it said. <br/>