What happened

Positive news on a new coronavirus vaccine helped lift airline shares in Wednesday midday trading. As of noon EDT, shares of American Airlines (NASDAQ:AAL) are leading the pack higher, up 7.8%, followed closely by fellow legacy carrier United Airlines (NASDAQ:UAL), with a 7.2% gain.

Discount flyers Spirit Airlines (NYSE:SAVE), JetBlue Airways (NASDAQ:JBLU), and Southwest Airlines (NYSE:LUV) are up 6.2%, 5.9%, and 4.9%, respectively. Delta Air Lines (NYSE:DAL) brings up the rear with a 4.2% gain.

Collage of an airplane, coronaviruses, and a world map

Image source: Getty Images.

So what

The fact that Delta is flying at the tail end of the pack is no great surprise. Delta had a bad day yesterday when its Q2 earnings report showed a $7 billion pre-tax loss on diminished air travel in the age of coronavirus, and that news may be creating something of a hangover effect for the stock. Nevertheless, Delta is sharing in rising optimism for airline stocks in general today.

Why? In a nutshell, the news is this: Last night after close of trading, biotech Moderna released more detailed analysis of the phase 1 clinical trials of its new mRNA-1273 vaccine against COVID-19, about which we first heard back in May. The new analysis appears to confirm the initial positive findings from the vaccine trial, showing only moderate to mild side effects (mostly headaches, fatigue, chills, and muscle soreness) but the successful production of neutralizing antibodies in "100% of evaluated participants" no matter whether they were dosed with 25, 100, or 250 micrograms of vaccine.

A phase 2 trial of mRNA-1273 is already underway, and Moderna says it has produced sufficient new doses to begin its phase 3 clinical trial as planned on July 27 -- then to rapidly ramp up production to as many as 500 million or even 1 billion doses annually.

Now what

Most experts agree it will take either an effective treatment to cure coronavirus or a safe and effective vaccine to prevent the disease's contraction (or even better, both) to reassure people that it is safe to resume traveling, and in particular safe to resume flying again. Moderna's Tuesday news therefore seems absolutely critical to the revival of an airline industry that has seen its flights flown cut by 75% (Delta's estimate for September capacity) and its number of seats filled on those flights cut to just 60%. This fact alone explains why investors in airline stocks are so excited by Moderna's news today.

That being said, there are a few grains of salt worth taking. For one thing, in a note covering Moderna's news last night, analysts at J.P. Morgan observed that as "encouraging" as Moderna's results appear, it is still "difficult to know how this will ultimately translate to clinical outcomes" of patients threatened with COVID-19 infection.  

At the same time, Delta itself warned yesterday that any future recovery in the airline business is expected to be "choppy," that "it will be more than two years before we see a sustainable recovery" in air travel, and that business travel in particular -- upon which Delta depends for more than half its revenues -- may never recover to prepandemic levels.  

All of which goes to say, be happy for this week's vaccine news, sure. But don't expect it to be a miracle cure for the airline industry's woes. This recession isn't over yet.