What happened

Shares of the legacy U.S. airlines all lost altitude in February, according to data provided by S&P Global Market Intelligence, caught in the broader COVID-19 coronavirus-related market downdraft. Shares of American Airlines Group (AAL -0.72%) traded down 29%, while shares of United Airlines Holdings (UAL 0.55%) and Delta Air Lines (DAL -0.71%) each lost more than 17% during the month.

So what

Although some of the market sell-off over coronavirus was likely fueled by uncertainty, the outbreak will definitely have a significant effect on first quarter results due to canceled flights and lost revenue. The "big three" airlines all canceled flights to China in late January after near-term demand for travel plummeted, and have selectively suspended other routes in response to coronavirus-related fears.

A busy airport.

Image source: Getty Images.

The stocks were hit hard in January due to the fears. What caused the sell-off to accelerate in late February was the spread of the coronavirus into new markets, including the first cases in the United States. Investors fretted that the coronavirus-related headlines would weigh on U.S. consumers as they plan summer vacation travel, potentially depressing demand during the peak summer season. Virus concerns also caused a number of companies to suspend non-essential business travel, eating into a key profit center for these large, legacy airlines.

American was hit particularly hard because it is seen as the most vulnerable of the major U.S. airlines to a prolonged travel slowdown. The airline has the highest debt burden among U.S. airlines, and going into 2020 had intended to use profits generated this year to pay down some of that debt.

AAL Chart

Airline data by YCharts

United, meanwhile, is the major U.S. airline with the most exposure to Asia. United gets about 10% of its revenue from Asia and has about 15% of its total capacity tied to the region, compared to 9% for Delta and 6% for American.

Delta might not be as big in the region as United, but the company does own a stake in one of the largest Chinese airlines and has targeted its relationship with Korean Air as a source of growth.

Now what

The markets hate uncertainty, and there is no way to say how aggressively the coronavirus will spread globally or how long it will take to get the outbreak under control. Until there is more clarity, it is going to be difficult for these stocks to take off.

That said, there is nothing to date to suggest that the coronavirus outbreak will leave a permanent mark on travel demand. And the airlines, though likely to report weaker earnings in the first half of 2020 if not beyond, are much healthier today than they were the last time there was a downturn and should be able to weather the storm.

Airline stocks are a lot cheaper today than they were a month ago. Expect continued volatility, and be selective about what you buy, but for those with the stomach to handle a rough ride in the weeks to come, the February drop-off has created some intriguing buying opportunities.