Airline stocks have been hit hard by the COVID-19 pandemic, which has caused demand for travel to plummet. Airlines big and small have been caught up in the sell-off, and with most in the industry expecting that travel volumes will need years to recover to pre-pandemic levels, there isn't much reason to get excited about buying in.

But for those patient enough to ride out the storm, the sell-off has created opportunities to buy airline shares at prices well below where they were trading just a few months ago.

LUV Chart

Airline data by YCharts

Southwest Airlines (LUV -0.91%) and Spirit Airlines (SAVE 0.15%) were two Wall Street darlings prior to the pandemic, but both stocks have been hit hard so far in 2020. Is now a good time to buy in, or do the risks still outweigh the rewards? Here's a look at both airlines to try to determine which, if either, is a better buy today.

Southwest: the discount king

Southwest has been a relative winner among airlines, down "only" 41% for the year. The company has always been viewed as a relatively safe haven among airline stocks and is the only large airline that can boast it has never landed in bankruptcy.

Southwest remarkably has also never had to resort to layoffs in its nearly 50-year history, and that streak seems likely to continue after the company received offers from more than 25% of its employees to take buyouts or extended leaves in order to help conserve cash.

The airline will need it. Southwest reported second-quarter revenue down 82% year over year, and Southwest warned it expects third-quarter capacity to be down considerably for the remainder of 2020 compared to last year.

An airplane flies above the clouds.

Image source: Getty Images.

Southwest has been slower to pull flights than many of its rivals, keeping inventory available for sale as a way to get a real-time read on demand. The company burned through about $16 million per day in June but hopes to breakeven in the third quarter, although that would require demand holding up into the fall.

Whatever happens, Southwest has the cash to survive the pandemic. The airline as of June 30 had $15.5 billion in total liquidity, or nearly two years of cash on hand, and feels good enough about its financial position that it has begun to pay back some of the higher-cost debt it took on in the early days of the COVID-19 crisis.

Not only is Southwest well positioned to survive, but its cash pile and schedule flexibility should allow it to rebound faster than other airlines that expect to be burdened with significant debt loads for years to come.

Spirit Airlines: the challenger

Spirit is a different breed of discounter from Southwest. The company is the U.S. pioneer of the "ultra-low-cost" model offering rock-bottom fares but charging for all sorts of amenities -- including carry-on luggage and in-flight snacks -- that Southwest includes for free.

The model, and Spirit, are often the target of complaints and ribbing from late-night comics, but Spirit has built a loyal following and prior to the pandemic was one of the nation's fastest-growing airlines.

Spirit too has been hit hard by the pandemic, with its shares down 60% year to date. The company reported second-quarter revenue down 86% year over year and said it was burning through about $1.5 million per day in June.

A Spirit A319 on the tarmac.

Image source: Spirit Airlines.

The airline was more aggressive than most in adding back capacity at the first sign of a demand rebound back in May. It will likely have to pull back some of that growth in the months to come as new COVID-19 cases spike in key areas and summer vacation season ends.

Spirit ended the quarter with $1.2 billion in cash on hand and expects to burn through $3 million to $4 million per day in the third quarter. That seemingly gives it some leeway, but with so much still unknown about the progress of the pandemic, there is still significant uncertainty hanging over the shares.

Thanks to its business model and low costs, Spirit can make a profit on fares well below what Southwest and other airlines have to charge. In other words, Spirit could be well positioned to be an early beneficiary when demand finally does return. But that day is likely a long way off, and Spirit, due to its small size, has much fewer levers to pull to cut costs or raise money.

That means Spirit investors will be flying through turbulence for the foreseeable future.

And the better buy is...

Southwest is the safer stock and for almost all investors is the better buy at this moment. Given its industry-best balance sheet, slowing cash burn, and continued strong labor relations, Southwest is positioned to remain standing even in a worst-case scenario where others end up in bankruptcy.

If things go well, Southwest can use those resources to be flexible and pounce early at the first sign of a recovery.

I believe Spirit will survive, but its shares are best bought as a small, speculative position in a broad, risk-tolerant portfolio. Thanks to its industry-low costs, Spirit is well positioned for the downturn, assuming it survives, and with the stock beaten down, there is the potential for outsized gains if all goes well.

But that's assuming it survives and doesn't need to resort to a series of highly dilutive stock sales to raise cash and fund operations. Given the risks, most investors are better off boarding Southwest right now.