What happened

Shares of United Airlines Holdings (NASDAQ:UAL) traded down nearly 4% on Tuesday afternoon. Earlier in the day, the airline announced it was raising added cash, but the stock appears to be moving more on fears about a resurgence in the coronavirus than they are based on company-specific news.

So what

Airlines have been hit hard by the COVID-19 pandemic, with shares of United down nearly 60% year to date. The stock was down more than 75% earlier this year as investors worried a 90%-plus drop in travel demand would force airlines into bankruptcy, but the stocks have recovered somewhat as demand has bounced off its lows.

A United Airlines jet leaves the hanger.

Image source: United Airlines.

The industry has also done a good job raising additional cash to help it ride out the storm. United has aggressively added to its liquidity, and debt, announcing on Tuesday it plans to raise $3 billion in new senior notes through its Mileage Plus Holdings subsidiary.

The airline is effectively getting an advance on future revenue it would earn selling frequent flier miles to partners.

The added capital is a plus because it appears the airlines' issues are far from over. Shares of United appear to be under pressure on Tuesday in part because of reports that new COVID-19 cases are surging in a number of states, raising fears that another round of state shutdowns could be unavoidable.

Now what

This is a difficult time to be invested in airline stocks. In the worst-case scenario, a sustained second wave of the pandemic strikes and cuts revenue to near zero for an extended period. That would almost certainly lead to some bankruptcies. And even in the best-case scenario, with no second wave and a quick economic recovery, it is likely to take years for flight schedules to return to pre-pandemic levels.

I'm hopeful the worst case can be avoided, but it seems whatever happens from here it will be a turbulent ride for shareholders. Investors should be cautious about which, if any, airline stocks they buy into until some of the uncertainty clears, sticking to top companies with the best chance to survive whatever lies ahead.