What happened

The airline sector was hit by COVID-19 coronavirus-related concerns again on Thursday, with shares of Alaska Air Group (ALK 0.67%) and Spirit Airlines (SAVE -1.36%) each down more than 10% in early trading.

The losses extended well beyond those two, however, with shares of American Airlines Group (AAL 0.61%), Southwest Airlines (LUV 2.01%), Delta Air Lines (DAL 0.39%), Hawaiian Holdings (HA 0.65%), and United Airlines Holdings (UAL 1.36%) all down more than 5%.

The industry seems certain to be hit hard by an outbreak-related slowdown in travel. But until the extent of that hit can be quantified, trying to call a bottom in these stocks is like trying to catch a falling knife.

So what

Airline stocks have been in a downward spiral in recent weeks as it has become more apparent that concerns about the novel coronavirus would stifle near-term demand for travel. This realization has called into question whether demand will materialize during typically peak travel times including spring break, Easter, and summer vacation. Shares of Spirit, Hawaiian, and American are now down about 40% year to date, and many other airline stocks are not far behind.

The sell-off has gotten worse as airlines begin to take actions that confirm investor fears about demand are accurate. Late Wednesday United said it would cut international flying by 20% and domestic flights by 10% in April, while on Thursday morning Southwest revised its capacity estimate downward saying it has seen a "significant decline" in demand in recent days.

Airplanes parked at a busy airport.

Image source: Getty Images.

On Thursday the International Air Transport Association estimated the coronavirus could cost airlines about $113 billion in lost 2020 revenue worldwide, well above the $29 billion estimate it had forecast just weeks ago.

Investors were also likely worried after British regional carrier Flybe ceased operations late Wednesday, the first major airline to fail due to the slowdown.

Spirit is under particular pressure because that company had originally forecast aggressive growth in 2020, and its shares had been priced in anticipation for that growth. American, meanwhile, is seen as the most vulnerable of the major U.S. airlines due to its high debt burden. American had intended to use profits in 2020 to pay down that debt, but it now appears likely the company's turnaround is going to take longer than anticipated.

Hawaiian is a niche airline both exposed to U.S. vacation travel and more reliant than any other U.S.-based carrier on Asia travel.

Now what

The markets hate uncertainty, and until there is some sense to how bad the coronavirus outbreak will be, and then some firm numbers on what the impact on airlines will be, it's going to be hard for these stocks to rally.

Fortunately, the U.S. industry came into this slowdown healthy, and unless conditions deteriorate significantly, the carriers should be able to weather this storm without ceasing operations or succumbing to bankruptcy.

In fact, I'd wager that a year from now we will look back on this decline as a buying opportunity. Berkshire Hathaway seems to think so: Warren Buffett's company raised its stake in Delta last week during the sell-off.

Note that Delta's shares are now trading below the average price Berkshire paid when it added shares, a reminder that these sell-offs can last longer, and run deeper, than even the smartest investors can anticipate. But for those who can handle the turbulence, and are selective about what they buy, now is a good time to take a flier on some airline stocks.