What happened

Airline stocks took a breather on Friday after three straight days of steady gains. The industry's outlook is much stronger now than it was a week ago thanks to the $2 trillion economic relief package making its way through Congress, but business conditions figure to be under pressure for some time to come.

Shares of Southwest Airlines (NYSE:LUV), American Airlines Group (NASDAQ:AAL), United Airlines Holdings (NASDAQ:UAL), JetBlue Airways (NASDAQ:JBLU), and Spirit Airlines (NYSE:SAVE) all opened down more than 10% before rebounding slightly as the day went on. Shares of Delta Air Lines (NYSE:DAL) and Hawaiian Holdings (NASDAQ:HA) are also down more than 5% on Friday.

So what

Airlines have been among the sectors hit hardest by the COVID-19 pandemic, with travel demand all but disappearing overnight and revenue dropping by 80% or more. The companies have taken steps including cutting flights, grounding planes, and freezing hiring, but no amount of cuts can compensate for a lack of revenue coming through the door.

Lawmakers have responded with up to $50 billion in loans and grants available to airlines in the Coronavirus Aid, Relief, and Economic Security Act (or CARES Act), which should go a long way toward helping these companies avoid flying into bankruptcy.

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

Image source: Getty Images.

But there is only so much that legislation can do, and the airlines still face an uncertain future. Until the pandemic is contained, it is hard to predict what the ultimate impact to their businesses will be. And if the U.S. falls into a recession, it could be multiple quarters before lucrative business travel rebounds.

Airline investors have endured a bumpy ride in 2020. Shares of all of the stocks listed here are down between 30% and 60% for the year. But in the last week alone, Spirit had more than doubled heading into Friday trading, and much of the industry is up more than 40% for the week even with Friday's pullback.

LUV Price Chart

Airline five-day pricing as of 1:42 p.m. Friday data by YCharts.

Now what

The airlines finish the week with a better financial outlook than at the start, but also facing a difficult environment in which to try to gain altitude. There is also likely to be continued volatility as the pandemic plays out.

For investors able to block out the noise and focus on the long term, I believe it is a good time to be looking carefully at the airline business. But be warned this will take some time to play out, and you are best off sticking with the top operators, at least for now.