What happened

Airline shares took flight Monday after another weekend of positive data points suggesting travel demand is slowly returning and a positive write-up of the industry in Barron's.

Spirit Airlines (NYSE:SAVE), one of the focuses of the Barron's article, gained 10% as of 11 a.m., leading the way among airlines. But the whole sector had momentum on Monday. Shares of American Airlines Group (NASDAQ:AAL), United Airlines Holdings (NASDAQ:UAL), Southwest Airlines (NYSE:LUV), Delta Air Lines (NYSE:DAL), Hawaiian Holdings (NASDAQ:HA), Alaska Air Group (NYSE:ALK), JetBlue Airways (NASDAQ:JBLU), and Allegiant Travel (NASDAQ:ALGT) all traded up about 5%.

So what

The airlines were hit hard by the COVID-19 pandemic, which has cut global travel demand to near zero. Airline stocks lost half their value or more in March and early April but have since stabilized thanks to government assistance as part of the CARES Act stimulus plan and private fundraising efforts.

A passenger walking through an airport with a mask on.

Image source: Getty Images.

The airlines are stable, but with traffic still down 90% or more year over year, the industry remains vulnerable. Companies are going to need passenger demand to return so they don't run out of cash in the months to come.

The weekend provided fresh evidence we are bouncing off the lows in terms of travel interest. About 620,000 travelers passed through Transportation Security Administration checkpoints on May 30 and 31. That's down dramatically compared to the 4.6 million travelers screened during the same two calendar days a year prior but nearly triple the number of passengers screened the first weekend in April.

If nothing else, the trend is moving in the right direction, and it suggests that a Memorial Day uptick was not a one-off holiday weekend phenomenon but instead a real sign of travel slowly beginning to normalize.

Barron's has noticed too, writing over the weekend that airlines have done a good job bolstering their balance sheets, adopting distancing guidelines, and reassuring customers by deep-cleaning planes. Domestic travel is expected to return first, and the widely read financial weekly highlights Southwest, Spirit, and Delta as stocks that look particularly interesting.

Now what

We seem to be heading in the right direction, but investors need to remember we still have a long way to go. It will likely take years until travel volumes return to prepandemic levels, and it's possible some of the more lucrative parts of the business, including corporate business travel and international flying, will never be the same.

I've been saying for a while now that I think it is safe to buy airline stocks, but given the uncertainty that still surrounds the pandemic and the economy, it is best to take small nibbles and limit the buying to the top airlines in the sector.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.