What happened

Shares of American Airlines Group (NASDAQ:AAL) fell more than 9% on Thursday morning, and shares of Delta Air Lines (NYSE:DAL) and Southwest Airlines (NYSE:LUV) each fell more than 6%, on continued coronavirus worries. Investors have been concerned for weeks that the virus would impact travel plans, and Wall Street analysts are beginning to try to get a sense of the damage done to the businesses.

So what

Airline stocks are a natural target for a coronavirus-related sell-off, with companies sure to see revenue declines in the first quarter due to cancelled flights. The more recent concern is that the spread of the virus into new regions would stunt global demand, and might weigh heavy on the minds of U.S. consumers as they book summer vacation travel.

On Thursday a number of airline stocks were downgraded by Deutsche Bank and Buckingham due to coronavirus concerns. Deutsche Bank analyst Michael Linenberg said that there is an increasing risk the coronavirus will impact travel patterns in the U.S., affecting peak travel periods including spring break, Easter, and summer. It could also impact business travelers, which tends to be a more lucrative business for airlines.

Airplanes parked at a busy airport.

Image source: Getty Images.

Buckingham analyst Daniel McKenzie said his firm's booking survey found a "near-collapse" of demand to Asia, and worried recent warnings by the Centers for Disease Control and Prevention were likely to impact U.S. travel. McKenzie said he initially had expected airline stocks to fall 10% to 15% further, but the pullback could be stronger and for longer than he had assumed.

American is under particular pressure because the company is seen as the most vulnerable major U.S. carrier to a prolonged slowdown in travel demand. American has the highest debt burden among U.S. airlines, and had intended to use 2020 profits to accelerate debt payments. Shares of American have now lost more than one-third of their value in the last two weeks.

Delta, meanwhile, has substantial exposure to Asia and owns a stake in one of China's top airlines, while Southwest is closely tied to U.S. leisure travel and is likely to feel a pinch if spring break travel is curtailed.

Now what

For the airlines, the question isn't whether the coronavirus will impact operations, it is how much they will impact and for how long. What had initially been seen as a first-quarter issue now appears likely to spread into the second and third quarters as well, and the total revenue hit is not yet quantifiable.

That sort of uncertainty understandably has sparked a sell-off, but for those with a long-term horizon and the stomach to ride through turbulence, the downdraft is likely to create some buying opportunities. Investors should trade carefully and be willing to accept more down days in the near future, but the airline industry is likely to fly through these headwinds eventually.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.