What happened

Airline stocks remained under pressure through much of April, as the full impact of the COVID-19 pandemic on travel and tourism became increasingly clear. The companies found themselves scrambling to cut costs and raise cash, and investors rushed for the emergency exits.

Shares of Southwest Airlines (NYSE:LUV) lost 12.2% for the month, according to data from S&P Global Market Intelligence, while shares of Delta Air Lines (NYSE:DAL) were down 9.2%, shares of United Airlines Holdings (NASDAQ:UAL) fell 6.2%, and American Airlines Group (NASDAQ:AAL) ended the month down 1.5%. By comparison, the S&P 500 was up 12.7% for the month.

The declines marked the second straight miserable month for the stocks, with the airlines falling between 22% and 48% in March.

So what

In March, airline stocks fell because investors were worried about what the pandemic would do to travel. In April, the stocks fell because those fears were confirmed. Despite securing $50 billion in aid from the U.S. government, the shares remained under pressure, in part because the government was able to extract warrants and other concessions in return for its largess, and in part because the airlines warned that the funds might not be enough.

An empty airport security checkpoint.

Image source: Getty Images.

Delta was burning through $60 million per day. Southwest warned of potential layoffs, a step the company was able to avoid following the attacks of Sept. 11. United said it was making plans to permanently become a smaller airline. American Airlines lost $2.2 billion in three months.

The entire industry is currently trying to wait out the pandemic without running out of cash, and then adjusting once they find out how much, and how quickly, traffic demand returns once the outbreak is contained. By then the U.S. economy is likely to be in a recession, and the industry has performed poorly in past recessions. Despite the government aid and the billions in cost cuts, the airlines have accomplished through grounding planes and cutting flights, investors remain concerned bankruptcies are possible.

Now what

Early May has offered little relief for airline investors. The stocks fell on May 1, and on May 2 Warren Buffett announced that Berkshire Hathaway had sold its massive stakes in the big four airlines down to zero.

Buffett during Berkshire's annual meeting was not critical of the airline business practices, or management, but rather concluded the industry faces unprecedented challenges. "The world has changed for airlines, and I wish them well," he said, predicting the industry would have to shed significant portions of their fleets, and a lot of jobs, in the years to come.

The world has certainly changed, and based on the falling share prices Berkshire is hardly the only airline shareholder to give up on the industry in recent months. I remain cautiously optimistic that traffic will return to sufficient levels to allow the airlines to limp through without bankruptcy filings, but the outlook is difficult and even in the best-case scenario we are looking at a multiyear recovery. And until there is more certainty, it is going to be hard for these stocks to find a bottom.

If investors dare fly into this turbulent sector, I'd advise sticking with top operators like Delta and Southwest to try to minimize some of the risk.