What happened

Shares of Boeing (NYSE:BA) climbed 5% on Tuesday, fueled by broader market optimism that the economy is beginning to return to normal and a surge in airline stocks. Boeing shares have plummeted this year as its airline customers have scrambled to survive, but Tuesday's headlines offer reason to hope the worst of the pandemic might be behind us.

So what

Boeing shares have lost more than half their value year to date, as the COVID-19 pandemic has caused airlines that just months ago were in expansion mode to instead cut costs, ground planes, and focus on survival. Boeing is a diversified company with a large defense business, but commercial aerospace has been its cash cow and driver of growth for the last decade.

A Boeing 787 Dreamliner gains altitude.

A Boeing 787 Dreamliner. Image source: Boeing.

The company was already facing challenges heading into the pandemic, with its 737 Max grounded for more than a year after a pair of fatal crashes. Boeing has overhauled its management and taken steps including cutting its dividend and raising new debt to help offset a $4.7 billion first-quarter loss.

Boeing, like its airline customers, needs to see travel normalize to alleviate some of the uncertainty surrounding the stock. Investors saw signs of normalization over the Memorial Day weekend in the U.S., with crowds flocking to beaches and other traditional vacation sites. Markets are also encouraged by good news regarding the development of COVID-19 treatments and vaccines from Merck and Novavax.

Boeing also got a boost on Friday when investor Michael Burry, made famous by The Big Short, disclosed that his Scion Asset Management hedge fund had bought in.

Now what

Boeing has plenty of cash and is at no risk of a liquidity crisis, and a recovery in air travel is certainly good news for the company. But investors need to remain cautious.

Even if travel does begin to normalize, airlines that have taken on mountains of new debt to weather the crisis are unlikely to buy new planes anytime soon. Boeing makes some money off of spare parts sales, but there are other aerospace companies that are likely to rebound faster.

The company still needs to get its 737 Max flying again and has a hole in its new-plane portfolio that is likely to sting when airlines start buying again. The worst might be over for Boeing, but I see no reason to buy in.