By Nell Mackenzie and Joanna Plucinska

LONDON (Reuters) - Shortsellers had their sights on airlines in August, as pessimism towards a sector plagued by earnings declines and price rises grows, a report by data and tech firm Hazeltree on Wednesday showed.

American Airlines Group, JetBlue, Wizz Air and British Airways owner International Consolidated Airlines Group all ranked in the top most crowded spots in the Hazeltree Shortside Crowdedness Report. Hazeltree compiles the report based on stock borrowing data globally from about 700 asset management funds.

To bet on a falling stock price, traders borrow the shares at a higher value to profit once they buy them back at a cheaper price. The more 'crowded' a short bet, the higher percentage of funds that are shorting it, according to the Hazeltree report.

American Airlines took the top most crowded short for U.S. mid-cap stocks, the Hazeltree data showed, while JetBlue came in eighth of the U.S. small-cap stocks.

In Europe, British Airways' owner came in seventh for large-cap stocks and Wizz Air hit the top most crowded ranking for small-cap stocks, said the report.

American Airlines, JetBlue, Wizz Air, and International Consolidated Airlines Group did not immediately respond to an emailed request for comment.

European airline stocks have struggled this year as carriers have faced a limited supply of new planes and rising labour costs.

Some investors and analysts say the airline industry, which is cyclical and closely tied to macroeconomic trends, could be facing another downturn as post-COVID travel demand stabilizes and consumers become more price sensitive.

Wizz Air has been noted by analysts as one of the market's worst performers as it faces engine checks, grounding a number of its Airbus fleet, and challenges tied to conflict in the Middle East and Ukraine impacting its routes.

Traders also took bets against banks during August, said the Hazeltree report, with Goldman Sachs the ninth most crowded U.S. large cap stock for shortsellers.

Goldman Sachs declined to comment.

A range of speculators take short bets from active asset managers to hedge funds.

While hedge funds were equally long and short on sectors such as industrials which includes airlines, they were short banks in August, according to a separate report by Morgan Stanley's prime brokerage which serves hedge funds.

European banks and insurance companies were one of the most net sold stock sectors in August, showed the Morgan Stanley report dated Sept. 5 and seen by Reuters on Wednesday.

Hedge funds sold stocks globally in August "amidst continued macro uncertainty and market volatility," said the Morgan Stanley report.

(Reporting by Nell Mackenzie Joanna Plucinska, editing by Dhara Ranasinghe and Alexandra Hudson)