Wednesday was another strong day for the stock market, lifted in large part by favorable earnings results among favorite companies. Moreover, market participants continue to be optimistic that a COVID-19 vaccine could help things get back to normal sooner rather than later. By the end of the trading day, gains in the Dow Jones Industrial Average (DJINDICES:^DJI) outpaced those of other indexes, but the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite posted rises as well.

Today's stock market

Index

Percentage Change

Point Change

Dow

+1.39%

+373

S&P 500

+0.64%

+21

Nasdaq Composite

+0.52%

+57

Data source: Yahoo! Finance.

Notable among gainers were shares of airline companies. Good news on the coronavirus front has obvious implications for airlines, but the financial challenges that these companies face remain difficult to overcome. News that carriers might get some more support from the federal government helped lift investor sentiment on Wednesday, but the money could be a two-edged sword for current shareholders.

Jumbo jet with landing gear down, against a colorful twilight sky.

Image source: Getty Images.

How airline stocks fared on Wednesday

The gains for airline stocks were impressive. American Airlines Group (NASDAQ:AAL) was by far the best performer, climbing almost 10% on the day. Other stocks also saw sizable gains:

  • Among major carriers, United Airlines Holdings (NASDAQ:UAL) and Southwest Airlines (NYSE:LUV) were each up 4%. Delta Air Lines (NYSE:DAL) followed with a 3% gain.
  • Regional carriers saw similar gains. Hawaiian Holdings (NASDAQ: HA) and Alaska Air Group (NYSE: ALK) were up 4%.
  • Other airlines participated in the rally. Discount leader Spirit Airlines (NYSE: SAVE) saw its stock rise almost 4%, and JetBlue Airways (NASDAQ: JBLU) joined in with a nearly 4.5% move higher.

The gains built on rising stock prices from Tuesday. Those earlier advances came on the heels of favorable data on traffic from the Transportation Security Administration, which reported that travel volumes continue to bounce back from their spring lows during the worst of the COVID-19 pandemic.

Another bailout ahead?

Wednesday's rise for airline stocks comes as industry executives have asked for further help from the federal government. Initial bailout packages came with strings that forced airlines to keep their workforces largely intact through the end of September. The hope at the time was that a six-month window would be enough for things to return to normal. It's now clear that the initial assessment was too optimistic.

In particular, lawmakers are strongly considering adding provisions to expected fiscal stimulus packages that would extend additional money to airlines in exchange for longer timelines of keeping workers on board. One proposal would add another $25 billion to the roughly $50 billion previous package, and most expect that airlines would have to agree not to let workers go for an additional three to six months.

What's uncertain, though, is just how much airlines would support such efforts. Southwest CEO Gary Kelly is on record supporting the move, joining United and American. But most airlines have already seriously contemplated cost-reduction efforts come October. 

Airline stocks are still a high-risk proposition for investors. Shareholders have to expect volatility to continue, and it could take years for the industry to get back to its pre-coronavirus status even if a solution to the crisis comes soon.