What happened

Investors in airline stocks continue to waver on the industry following the passage of a $2 trillion economic stimulus bill that includes $50 billion for passenger carriers. The stocks rallied last week but were down on Monday, only to bounce back Tuesday as more details trickle out about how the airlines are going to cope with the COVID-19 coronavirus pandemic-induced travel slowdown.

Shares of United Airlines Holdings (UAL -2.88%) led the way on Tuesday, up 10% at noon, with shares of Delta Air Lines (DAL -1.62%), American Airlines Group (AAL -3.45%), and Southwest Airlines (LUV -3.44%) all up more than 5%.

So what

The airline sector has been among the hardest hit by the pandemic, with travel demand all but evaporating overnight. A Transportation Security Administration (TSA) spokesperson said Tuesday that on Monday, the agency screened 154,080 passengers nationwide, the lowest single day in 10 years. By comparison, on March 30, 2019, the TSA screened 2,360,053 people.

A person walking through an airport, wearing a face mask and toting a suitcase on wheels

Image source: Getty Images.

Most airline stocks lost more than half of their value in the first three weeks of March before stabilizing as lawmakers in Washington agreed on an assistance package that includes $25 billion in grants and $25 billion in loan guarantees to help get the industry through this slowdown. The airlines have until Friday to apply for the assistance, with American already telegraphing its intention to seek relief and other carriers expected to follow.

Markets are now going back and forth on the sector, with investors both growing increasingly confident the airlines have the financial firepower to weather a multimonth storm but also worried about how quickly demand might return. United has warned workers that the assistance is likely only enough to get it through the summer, saying if demand doesn't return it would consider furloughs after Sept. 30.

On Tuesday, the news flow was mostly positive, with the Department of Transportation signaling it will be flexible when enforcing rules requiring the airlines to sustain service to all markets in return for the assistance.

Now what

The good news for investors is that after enduring weeks of seemingly daily double-digit declines, the stocks have stabilized somewhat. The bad news is that until the pandemic is under control and we have some idea of how quickly the economy will bounce back, and with it air travel, it is going to be hard for these stocks to really take off.

LUV Chart

Major airlines year-to-date data by YCharts

This is going to take some time to play out, but for those who can stomach the turbulence, I do believe it is safe to start looking at airline stocks. Given the uncertainty, it is best to focus on the top operators in the industry that should be able to survive the longest if conditions remain bad past the summer months.