Airline stocks in the UK’s FTSE indexes have been hit hard recently. Year to date, some of these stocks are down nearly 30% amid the conflict in the Middle East and the spike in oil prices.

Looking ahead, hedge funds expect to see further share price weakness across the sector. However, there’s one stock in particular they are betting heavily against.

Is this stock about to nose dive?

The stock is Wizz Air Holdings (LSE: WIZZ). It’s already having a terrible year – the share price is down about 26%.

However, hedge funds clearly expect to see further share price weakness in the near term. At present, short interest (the proportion of the company’s shares being shorted or bet against) is around 14%.

That makes Wizz Air the most shorted stock in the UK. In other words, it’s the stock that hedge funds are most bearish on.

Note that according to regulatory filings, 12 different institutions are betting against the stock. There could be more, though – firms only need to disclose their positions if they are shorting 0.5% or more of a company’s shares.

What’s wrong with Wizz Air?

Now, I can see why hedge funds are targeting this name. For a start, the company has a lot of operational exposure to the Middle East – it normally offers flights to Israel, Saudi Arabia, and other countries in the region.

Recently, it suspended flights to Dubai, Abu Dhabi, and Amman from mainland European destinations until mid-September. As for flights to Medina (Saudi Arabia), these have been suspended indefinitely.

Note that in March, the company estimated that the Middle East conflict would result in a negative impact to its FY2026 net profits of around €50m. If the conflict drags on though, the hit could be larger.

At its stands, analysts expect the company to post a net loss of about €31m for the year ended 31 March. Looking ahead, they expect a net loss of about €106m for the current financial year.

Secondly, the company is financially weaker than a lot of other airlines. At the end of September 2025, for example, it had net debt of €4,833m.

With profits and cash flows coming under pressure due to the geopolitical backdrop, this debt pile could become more of a problem because it’s going to be harder to service.

One other issue worth mentioning is that the company was experiencing challenges before the Middle East conflict. Recently, a large proportion of its fleet has been grounded due to power unit problems.

What’s the best move now?

Given the high level of short interest, I think investors should consider avoiding Wizz Air shares for now. To my mind, they’re risky.

I’ll point out that the short sellers don’t always get things right. But quite often, stocks that are heavily shorted go on to fall significantly (I’ve been burnt in the past before).

Of course, in the long run, Wizz Air shares could recover. After all, demand for cheap flights to destinations such as Malaga, Faro, Prague, and Krakow is likely to remain high.

However, for now, I think there are safer stocks to consider buying.