What happened

March was rough for investors in a broad range of industries, but holders of airline stocks had a particularly miserable month. The COVID-19 coronavirus pandemic caused demand for travel to evaporate overnight and sent companies scrambling to bring down costs and avoid bankruptcy court.

The COVID-19 impact was initially felt by airlines with strong Asia operations, but as the outbreak spread globally, U.S.-focused discount airlines were hit hard, as well. Shares of Spirit Airlines (SAVE -0.78%) lost 54.7% for the month, according to data provided by S&P Global Market Intelligence, while shares of JetBlue Airways (JBLU 3.36%) were down 43.3%, and Southwest Airlines (LUV 0.24%) fell 22.9%.

So what

Airlines are a high-fixed-cost business, and these companies were poorly positioned to see revenue plummet as the pandemic spread rapidly. The U.S. government came through with $50 billion to support the industry in late March, temporarily stabilizing the shares. But no amount of assistance will be enough if travel demand doesn't return in the months to come.

An airplane coming in for a landing.

Image source: Getty Images.

That's no sure bet. In years past, a recession has inevitably led to the failure of one, if not more, airlines, and Spirit and JetBlue were trading in March as if investors worried some bankruptcies were inevitable. Both companies, and the industry as a whole, came into this crisis healthier than ever before and with balance sheets that should be able to withstand a garden-variety recession. But with so much uncertainty and unprecedented closures and disruptions, this isn't a garden-variety downturn.

Now what

The best-case scenario for these companies is that after a miserable first half of 2020, traffic will rebound as the pandemic is contained and they'll be back on course by the second half of the year. That seems increasingly unlikely because economic indicators suggest COVID-19 is going to throw the U.S. economy into a recession.

If history is a guide, tourist travel, the bread and butter of these companies, returns quicker than corporate travel because vacation demand is more easily stimulated by low prices. Then again, this downturn is different than any other, and it's hard to make predictions about what demand might look like coming out of a pandemic.

Southwest Airlines and Delta Air Lines are the two U.S. carriers best positioned to weather whatever lies ahead, but since Southwest has not fallen nearly as much as other airlines, there's likely less upside for investors from here. Spirit is a high-risk/high-reward investment, vulnerable for now due to its high relative debt and niche network, but able to make money at lower price points than most other airlines due to its unique cost structure.

JetBlue has higher costs than Spirit and lacks the balance sheet and reach of Southwest. The company in recent years has focused on premium service to differentiate itself and attract more lucrative business travel. But it could find it tough to regain its momentum even after Southwest and Spirit are able to gain altitude again.