What happened

Another day, another double-digit drop at the opening for airline stocks. The industry and its investors are fixated on a government assistance package, and while White House officials continue to insist it is a top priority, every day nothing gets done adds to the uncertainty.

Shares of Spirit Airlines (NYSE:SAVE) opened down more than 20%, while a basket of airlines including American Airlines Group (NASDAQ:AAL), Delta Air Lines (NYSE:DAL), United Airlines Holdings (NASDAQ:UAL), Southwest Airlines (NYSE:LUV), Alaska Air Group (NYSE:ALK), Hawaiian Holdings (NASDAQ:HA), and JetBlue Airways (NASDAQ:JBLU) all opened down more than 10%.

Most have recovered at least some after that initial fall but expect the volatility to remain as we await more news about a potential bailout.

So what

The airline industry's woes are well documented, with the COVID-19 coronavirus pandemic all but wiping out global travel demand and causing bookings to drop to record lows. The industry has scrambled to cut costs by freezing hiring and cutting schedules, but there is no amount of cost cutting that can offset revenue falling off a cliff.

Delta Air Lines, for example, said it expects March revenue to decline by about $2 billion year over year, with April expected to be worse. Delta is grounding upwards of 600 planes and taking other steps to control costs, but in a memo to employees, CEO Ed Bastian said he doesn't know if that will be enough.

"In this unpredictable environment we can't take any options off the table," he said.

A tourist wearing a safety mask walks through an airport terminal.

Image source: Getty Images.

White House officials have said airlines are a top priority, with the industry floating a $50 billion package of grants, deferred taxes, and loan guarantees to get them through the crisis. But there is substantial pushback to that plan, and the outlook for aid, and what form that aid might take, is uncertain.

Meanwhile, the global situation for airlines continues to grow more dire. The International Air Transport Association on Thursday said upwards of $200 billion in aid will be required worldwide to rescue the industry.

Now what

There is a confidence game of sorts going on with the industry right now. Most of the airlines have a cash runway of a couple of months and plenty of unencumbered assets to use as collateral for new financing. But they need lenders, creditors, and other counterparties to remain confident the airlines will not eventually go bankrupt in order to access additional capital.

A government aid package provides at least some level of assurance that the airlines will remain flying, which in turn should open up more private-sector avenues for raising cash and might, ironically, make government assistance less necessary. Some of the larger, better-run airlines like Delta can likely fly through this storm regardless, but could end up in real danger if a weaker airline were to fail and cause panic to ripple through the industry.

Until the pandemic is contained and travel begins to normalize, it might be tough for these airline stocks to escape volatility. But in a world full of uncertainty, in the near-term expect the airlines to jump based on the prospects of a relief package coming out of Washington.