What happened

Airline shares were under pressure Thursday after pessimistic commentary by Southwest Airlines (NYSE:LUV) about the pace of a recovery.

Southwest closed down more than 3%, but the biggest decliners on the day were Spirit Airlines (NYSE:SAVE), JetBlue Airways (NASDAQ:JBLU), and United Airlines Holdings (NASDAQ:UAL). All three were off by 5% or more during the day, and Spirit finished down 6.6%.

So what

It's been a tumultuous week for airline stocks. The shares soared higher on Monday on positive news concerning the development of a coronavirus vaccine. But in the days since, they have been coming back down to earth on the reality of how long it will take for widespread inoculations, and fears about how bad the situation might get in the meantime.

The airlines have been devastated by the pandemic, which has caused travel demand to evaporate and has thrown the entire industry into the red. It's nearly impossible to make a bull case for the stocks to recover without a vaccine, and even if conditions improve in the months to come, the carriers are still going to need years to rebuild their balance sheets and to get healthy again.

Airplanes parked at an airport.

Image source: Getty Images.

With the number of new virus cases spiking, it's hard to imagine conditions improving quickly. Southwest on Thursday warned investors that the gradual uptick in demand it had seen this summer is decelerating, raising questions about travel during the all-important holiday season.

Spirit and JetBlue are seen as potential early winners in a recovery because of their focus on leisure travel. It is assumed vacationers will return first once a vaccine is widespread, and both Spirit and JetBlue have a lot of flights to sunny destinations that are popular with tourists.

United, meanwhile, was likely hit harder than most by a decision by Chicago to impose new lockdowns and stay-at-home orders, including a plea for people to think twice about traveling over Thanksgiving. Chicago is United's home base and an important domestic hub for the airline.

Now what

We warned on Monday that investors should be careful not to get too far ahead of themselves on the vaccine news, and the advice still applies today. Progress toward a vaccine is the first step toward the airlines getting back to normal, but even in the best-case scenario, there's a long, difficult journey ahead.

For investors, it is increasingly looking like the U.S. publicly traded airlines will be able to avoid dire outcomes like bankruptcy filings. But beyond that, there isn't a whole lot to get excited about in the near term.

For those who want to buy in and wait out a recovery, keep airline shares to a small part of a well-diversified portfolio. And focus your attention on the top operators in the industry with the best chance of survival no matter what happens, specifically Southwest and Delta Air Lines. (NYSE:DAL).

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.