What happened

On paper, it looks like it should be a terrible day for airline stocks. The U.S. reported more than 100,000 new COVID-19 cases on Wednesday, and deaths are also on the rise. Politicians are talking about lockdowns, and whatever hope there was of a second stimulus package seems likely to be caught up in post-election gridlock.

Yet despite all the bad news, airline shares gained altitude on Thursday. American Airlines Group (NASDAQ:AAL), United Airlines Holdings (NASDAQ:UAL), Delta Air Lines (NYSE:DAL), Southwest Airlines (NYSE:LUV), and JetBlue Airways (NASDAQ:JBLU) all were up about 5% heading into the close as investors tried to look past the near-term turbulence.

So what

Airlines have been among the sectors hit hardest by the pandemic, with virus fears and lockdowns causing a steep drop-off in travel volumes. The industry has raised billions to try to ride out the crisis, but there will be no recovery until the pandemic is under control and life begins to normalize.

A plane taking off from the runway.

Image source: Getty Images.

So why are the stocks up today? Hard to say for sure, given the dreary news. But there was a market rumor flying around suggesting that lawmakers would look to pass a second stimulus bill targeting airlines during the post-election legislative session.

Airlines benefited greatly from the CARES Act, which provided the industry with $50 billion in support and allowed them to put off layoffs. There was bipartisan support to extend that aid when the current funding expired Sept. 30, but the efforts faded due to pre-election squabbles over a broader stimulus effort.

It's too late to avoid layoffs now, but any assistance would still help ensure that the companies are able to survive a prolonged downturn.

There's also some hope that even with the spiking cases, travel will rebound this holiday season. In a note out Wednesday, Cowen analyst Helene Becker said that "people are tiring of not traveling," and reiterated her expectations that travel volumes will cross one million passengers per day around Thanksgiving. Right now, on a good day, about 700,000 people are traveling.

Now what

The markets have been soaring in recent days, and airline shares have gotten caught up in the enthusiasm. That's great, but investors should be careful not to get ahead of themselves.

We are in the early days of a multi-year recovery, with passenger travel volumes not expected to return to pre-pandemic levels until 2023 at the earliest. More lucrative travel, including business and international, will likely be the last to return, meaning margins and pricing could be affected for years.

With that in mind, it is best not to get caught up in the day-to-day news or headlines, whether they are good or bad. Those interested in buying into airlines should do their best to ignore the noise, focus on top operators including Delta and Southwest, and buckle up to ride through the turbulence.

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.