What happened

Airline shares remained under pressure on Thursday, continuing a downward spiral that saw many large companies lose more than one-third of their value in March. Spirit Airlines (NYSE:SAVE) led the march downward on Thursday, falling nearly 10% early in the day, while shares of American Airlines Group (NASDAQ:AAL) and United Airlines Holdings (NASDAQ:UAL) were both down more than 6%.

So what

The airlines have been among the sectors hardest hit by the COVID-19 pandemic, with demand for travel all but evaporating overnight. The carriers have responded by cutting flights and grounding airplanes, but no amount of cost reductions can offset a steep decline in revenue.

The industry got some help late in March when the government came through with $50 billion in support, but that capital only buys time and will not be enough if demand does not quickly return.

Planes at the gate at an airport.

Image source: Getty Images.

American, United, and Spirit are all seen as particularly vulnerable to a downturn, but for different reasons.

American has the highest debt load in the industry, which in past cycles has been a recipe for disaster heading into a recession. United has more Asian operations than most of its U.S. rivals, and with hubs in Houston and San Francisco is exposed to falling crude prices and the potential deflation of a Silicon Valley bubble. Spirit is a fringe carrier with total debt more than four times EBITDA, and might not be top of mind for lawmakers if Washington is required to provide further assistance to the industry.

For now, the airlines are doing all they can to build their cash reserves. American said in a regulatory filing late Wednesday that it had tapped three different revolving credit facilities to add a total of $2.73 billion in fresh cash to its balance sheet.

Now what

There's no easy way out for the airlines right now, and at the very least the next few quarters are going to be ugly. I remain hopeful that the pandemic will be contained in the months to come and air traffic will rebound to at least normal recessionary levels. But even if that happens, it is going to take until 2021 at least for these stocks to really take off.

Of the three stocks listed above, Spirit is the one with the highest risk (and the highest potential reward) for investors, but the risk should not be underestimated. For those not quite so bold but still intrigued by airline stocks at their current (depressed) levels, I'd recommend sticking with the best operators in the industry.