What happened

Airline shares are mostly higher on Friday, with American Airlines Group (NASDAQ:AAL) as a notable exception. On a day when most airlines are gaining altitude, American dropped more than 5% midday as investors continue to digest earnings and look ahead to a bleak future.

So what

On Thursday, American reported a third-quarter loss as expected, but revenue came in higher than expected. The airline also had more than $13.6 billion in liquidity at quarter's end, and has boosted that total in the weeks since by tapping the CARES Act-authorized U.S. Treasury lending program.

Airlines have struggled due to the coronavirus pandemic, and with travel expected to take years to return, American and other carriers are cutting costs, strengthening liquidity positions, and preparing to ride out the storm.

An American Airlines plane flies over the clouds.

Image source: American Airlines.

American has the cash in place to sustain for a significant period, but the company will be crimped by more than $30 billion in debt once a recovery begins.

Among the factors likely weighing on the stock is American's plan to issue up to $1 billion in new equity, boosting its cash balance but at the expense of diluting current shares. The news out of Washington was also bleak, with it growing increasingly apparent there will be no further stimulus prior to the election.

Now what

Today's sell-off is likely fueled by the equity authorization, but American is undeniably holding a weak hand among airlines. The company was the laggard in a wave of restructuring and transformation in the industry prior to the pandemic, and due to its debt will likely take longer than most to recover.

The good news is American has enough cash in the bank that the equity is not likely to go to zero via a bankruptcy. The bad news is there isn't much reason to believe a recovery will take anything less than years. Investors on Friday aren't in any mood to wait out a rebound.