What happened

Shares of airline stocks traded down again on Monday on continued concerns about the impact of the COVID-19 coronavirus outbreak on travel. American Airlines Group (AAL 0.99%) continues to get hit particularly hard, down nearly 5% at midday.

So what

Airlines have been among the sectors hardest hit by coronavirus concerns, as the companies have been forced to suspend service to parts of Asia. The recent spread of the virus into new regions, including confirmed cases and deaths in the United States, have led to concerns about a much broader, and prolonged, impact on the sector.

An American Airlines plane sits on the tarmac.

Image source: American Airlines.

Cowen analyst Helane Becker on Monday raised the prospect that airlines could be forced to start canceling transatlantic flights or even start drawing down domestic capacity if demand weakens. A growing number of companies are also limiting corporate travel, which is significant because major airlines depend on corporate accounts for much of their profits.

Should business travel decline, airlines could attempt to fill seats by offering lower fares. But that would be profit-draining at best and could be difficult if consumer anxiety about the outbreak further cuts into demand.

American Airlines shares have fallen faster and harder than those of other airlines because it is considered the most vulnerable to a prolonged slowdown. The airline has the highest debt burden among U.S. carriers, and going into 2020 it had made paying down that debt a priority. With the Boeing 737 MAX grounding affecting operations and now the threat of lower revenue and profits for the year due to health concerns, American's recovery is going to take longer than expected to materialize.

Now what

With Monday's sell-off, American shares have now fallen more than 37% since Feb. 15. The company now trades at less than 0.3 times sales.

AAL Chart

Airline data by YCharts

American has significant issues, but in all but the worst-case scenario it should have the wherewithal to avoid a bankruptcy filing. It's hard to recommend investors jump into the shares due to the continued virus-related uncertainty and the long-term nature of the airline's turnaround plan, but with each passing day of declines the sell-off is beginning to feel more overdone.