What happened

Airline shares were under pressure on Monday after a closely watched indicator of travel demand posted its first weekly decline since April. A spike in new coronavirus cases is crimping travel, and that's bad news for airlines.

Shares of Spirit Airlines (NYSE:SAVE) led the industry lower, down 5.5% at the close today, while shares of United Airlines Holdings (NASDAQ:UAL) were off 4.7% and shares of American Airlines Group (NASDAQ:AAL), Hawaiian Holdings (NASDAQ:HA), Southwest Airlines (NYSE:LUV), Delta Air Lines (NYSE:DAL), and JetBlue Airways (NASDAQ:JBLU) were all down about 3%.

Alaska Air Group (NYSE:ALK) and Allegiant Travel (NASDAQ:ALGT) also closed down around 3% each.

So what

Airlines have been hit hard by the COVID-19 pandemic. Delta, for example, last week reported that second-quarter revenue was down 88.2% year over year due to lack of demand. But consumer interest in flying had been rebounding somewhat off April lows as regions of the country began to reopen.

Growing numbers of new cases in tourism hotbeds including Florida, California, and Texas are threatening to reverse the progress. The average daily number of travelers passing through Transportation Security Administration checkpoints fell slightly in the seven days ending Sunday compared with the prior seven days. Investors have been watching the TSA numbers carefully, and sending airline shares higher in recent weeks as they slowly climbed.

A plane flies above the clouds.

Image source: Getty Images.

Analysts at Bank of America sounded a similar alarm on Monday, warning that domestic bookings are decelerating after a slow rise earlier in the summer.

It's becoming increasingly clear that the airlines are in for a prolonged downturn. The industry is prohibited from layoffs until October as a condition for receiving government aid, but you can expect most airlines to shed a significant portion of their total workforce this fall.

Some airlines are already making progress toward that goal. Southwest said Monday that about 25% of its employees had accepted voluntary buyouts or extended leaves of absence, which should reduce the need for involuntary layoffs, if not eliminate them. And Delta has proposed that its pilots take pay cuts to avoid furloughs.

United and American have sent required furlough notices to 36,000 and 28,000 employees, respectively. That doesn't necessarily mean that the two airlines will cut that many jobs, but it gives them significant leeway to do cuts once the CARES Act prohibition is lifted.

Now what

There are probably few airline investors left out there who at this point would be surprised to hear the recovery is going to take time. The good news is the airlines have piles of cash to help get them through the crisis: U.S. carriers have raised about $50 billion in private debt and equity funding to go along with a similar amount of government aid. The bad news is, they are likely going to need much if not all of it.

For those wanting to buy in and ride out the turbulence, there are some airlines that look like safer bets than their rivals. Southwest has nearly two years' worth of cash on hand, while Delta is on target to eliminate cash burn by year's end.

Just be warned it's best to buckle up and prepare for a long, arduous journey ahead.