What happened

Airline shares lost altitude on Monday morning after a weekend news cycle heavy on concerns about a new wave of COVID-19 cases and closings. The airlines were hit hard in the spring when the U.S. and international partners went on lockdown, and the industry can ill afford to see a repeat.

Shares of Hawaiian Holdings (NASDAQ:HA) led the industry lower, down 10.1% at one point Monday morning, while Delta Air Lines (NYSE:DAL) fell as much as 9.5% and United Airlines Holdings (NASDAQ:UAL), Spirit Airlines (NYSE:SAVE), and JetBlue Airways (NASDAQ:JBLU) all fell more than 8%.

Other airlines fared only slightly better, with Alaska Air Group (NYSE:ALK), Southwest Airlines (NYSE:LUV), American Airlines Group (NASDAQ:AAL), and Allegiant Travel (NASDAQ:ALGT) all down more than 5%.

So what

Travel demand was all but wiped out by pandemic-related lockdowns, and airlines have been slow to recover in the months since. Industry revenue was down 80% in the second quarter year over year, and the Transportation Security Administration is only screening about one-third of the passengers it was handling a year prior.

As bad as things are right now, they are better than they were in March and April. And airline shares are up from those spring lows.

View through an airport window of a plane taking off outside.

Image source: Getty Images.

The stocks are under pressure on Monday because of some weekend discussion about a second wave of the virus and the potential for a new round of closures. New case reports are rising in some parts of the country, and former Food and Drug Administration commissioner Scott Gottlieb during an appearance on Face the Nation this weekend warned, "I think we have at least one more cycle with this virus heading into the fall and winter."

Add to that a worsening situation in Western Europe, where many countries are reimposing lockdown conditions. Shares of British Airways parent International Airlines Group fell more than 12% in London on the potential impact of a second round of closings on the U.K. economy, and airlines in the Western Hemisphere seem to be following European stocks downward.

Now what

Airline stocks are largely stuck in neutral right now. Every carrier has enough of a cash cushion to see them through an extended downturn, but no company can sustain the current level of losses indefinitely. The stocks tend to trade as a group, getting a boost from good pandemic-related news and falling on signs of new troubles.

For long-term investors, it is best to try to block out the day-to-day noise related to the pandemic and focus on businesses with the best chance of surviving whatever lies ahead. For me that means focusing attention on companies including Southwest and Delta, while avoiding some of the more indebted airlines including American.

I'm optimistic the airlines can fly through this crisis without bankruptcy, but until we know more about how the pandemic plays out it is impossible to say for sure. For those investors with the stomach for turbulence, I'd advise sticking with top airlines and making them only a small part of a well-diversified portfolio.