EasyJet investors can expect a steady decline in the airline’s share price and a possible cut to the dividend if fierce competition keeps airfares low over 2017, according to analysts.

RBC Capital has slashed its target share price for the low-cost carrier saying its balance sheet is likely to come under increasing pressure next year unless ticket prices defy expectations by climbing higher.

The company’s stock slumped more than 2pc to 976p this morning following the bank’s stark warning that it could slide to 900p next year. A plunge to 740p a share is possible, if the problems facing the airline remain unresolved, RBC added.

The bank has warned in the past that easyJet needs to face up to the downturn in the sector either by lowering its dividends or revising its spending plans for its fleet.

“Neither have been delivered, and nor have we seen any signs of meaningful competitor exits needed to stabilise the market’s supply-demand imbalances,” the bank said.

“If pricing stays weak for longer, we estimate that over five years the shares could see total return downside by 2020,” it said, adding that the risk for shareholders was growing.