It's been a rough year for airline investors, as the coronavirus pandemic has caused global travel volumes to evaporate, sending the industry scrambling to avoid bankruptcies.

Shares of U.S. airlines are down between 40% and 63% year to date. There are likely good bargains to be found if the industry can weather the crisis. But given the uncertainty about COVID-19, and about how the economy will look when the pandemic is over, there's no assurances the airlines can persevere.

View out the window from an airport lounge.

Image source: Getty Images.

For those brave enough to dip their toes into the airline sector and hope for the best, here's why Southwest Airlines (NYSE:LUV), Spirit Airlines (NYSE:SAVE), and Alaska Air Group (NYSE:ALK) are three airline stocks worth considering.

Good reasons to show this airline's stock some LUV

John Rosevear (Southwest Airlines): Southwest has long been a favorite of investors, and there are some very good reasons to like it now. For starters, Southwest has the not-at-all-dubious distinction of being the only major airline that has never gone through bankruptcy -- and it's arguably the carrier with the best chance of gliding through the current crisis unscathed. 

That's a credit to management, which has always kept the company's balance sheet in clear skies.

At a moment when the industry's skies are anything but clear, it's still true: Having raised about $16 billion since the beginning of the year, the company said in June that it has enough cash to last two years at its current burn rate. 

Better yet, it expects that burn rate to decline over time, even if industry conditions don't improve -- and if things get worse or last longer than we expect, it has about $12 billion in additional unencumbered assets to borrow against.

A Boeing 737 MAX airliner in Southwest Airline's trade dress, shown in flight above clouds.

Southwest was an early customer for Boeing's troubled 737 MAX. Ironically, the aircraft's troubles are providing a cash stream right when Southwest needs it: Boeing has already paid Southwest over $400 million in 737 MAX-related damages this year. Image source: Southwest Airlines.

Of course, things will get better for all of the airlines, eventually. But another reason to like Southwest is that its recovery might come early. Consider that the majority of its routes are domestic, which are likely to see demand return before international routes, and that in a typical recession, it's the leisure travelers (rather than business travelers) who return first -- because they're more likely to travel when tickets are discounted. 

Now consider that Southwest can -- famously -- make money on low fares that most other carriers can't profitably match. 

Long story short: Southwest has a better chance than most of emerging from the COVID-19 mess in good shape, and an excellent chance of leading the industry's recovery. That makes it a strong choice here. 

A "Spirited" pick for an airline recovery

Lou Whiteman (Spirit Airlines): Spirit in normal times is the butt of a lot of jokes as the nation's biggest "ultra-low-cost" carrier, charging for "extras" like carry-on bags and refreshments that other airlines give away for free. But Sprit's laser-focus on costs, and ability to undercut all comers on ticket prices, makes it a dark horse to outperform the competition in the quarters to come.

We know it's going to be an extended downturn for airlines, with the industry expecting it will take until 2022 at least before travel demand returns to pre-pandemic levels. If this downturn plays out like previous ones, airlines will lean heavily on leisure travelers in the quarters to come.

Vacationers and those visiting family tend to be more easily lured back by low fares. That's Spirit's core audience, and thanks to its industry-low cost structure, Spirit can use pricing to profitably fill its seats better than anyone else in the industry.

In the first half of 2020, Spirit reported a cost per available seat mile (CASM), an industry metric used as a base unit for airline flying, of 10.29 cents. Discount king Southwest, by comparison, spent 12.17 cents. In more normal times, Spirit's CASM tends to be half of what large network carriers spend, and 25% or more below other low-cost carriers.

Spirit's advantage is tied somewhat to using its planes more and packing people in, which will be harder to do in the post-COVID period. But with all airlines having to adjust, management is confident Spirit is still in good shape to compete.

"Our cost advantage is here to stay," CFO Scott Haralson said on a late-July call with investors. "All airlines are going to be facing short-term utilization reductions and it impacts everyone's cost structure."

A Spirit Airlines plane on the tarmac.

Image source: Spirit Airlines.

Spirit's cash situation appears adequate. The company at the end of June had $1.2 billion in unrestricted cash, and expects to burn through less than $4 million per day in the third quarter.

Given the uncertainty, I'm not ready to guarantee any airline can fly through this crisis. But if the worst-case scenario is avoided, Spirit is both the least-expensive U.S. airline relative to book value and a top candidate to be among the first airlines to bounce back. For those looking to speculate on a recovery with a small part of a well-diversified portfolio, Spirit is not a bad place to look.

Still a stone cold bargain

Rich Smith (Alaska Air Group): As recently as seven months ago, I would have called Alaska Air Group (which is based down in the lower 48, by the way -- in Seattle) a stone cold bargain. I mean, a company with an $8 billion market cap, generating more than $1 billion in annual free cash flow? Where do I sign up?!

But then the coronavirus happened.

From late February 2020 to late March, Alaska Air stock plummeted 64%, ending at $23.56. At a recent price of $34, it's already recovered nearly 50% off its lows. Call me crazy, but I still think it's a bargain ... if you can be patient long enough.

"Thanks" to the COVID-19 outbreak, Alaska Air got pushed into a $232 million loss in Q1 this year, then followed that up by reporting a $214 million loss in Q2. The stock is almost certain to end this year with a huge GAAP loss before returning to profitability in 2021.

Still, the prospects for an eventual recovery look good. Cash burn rates have already been cut from as much as $400 million a month at the start of the pandemic to $120 million in June, Alaska reported at the end of July. And now we know the company is working to whittle that number down even further.

Meanwhile, the airline has $2.8 billion in cash and equivalents on hand, good to fund nearly two years of operations at the current burn rate -- and access to another $1.1 billion in government loans if it needs them, enough to last an additional nine months.

With The Wall Street Journal predicting that air traffic will recover about "a year or more following the launch of a vaccine" against the coronavirus, "and another year after that before travel happens in large numbers" sufficient to get profitability back to normal, I think Alaska has enough cash at this point to get through this crisis and emerge a survivor.  

 
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.