What happened

Airline shares took flight in November, buoyed by news of progress in the race to develop a COVID-19 vaccine.

Delta Air Lines (NYSE:DAL), American Airlines Group (NASDAQ:AAL), and Southwest Airlines (NYSE:LUV) led the charge higher, up 31.4%, 25.3%, and 17.2% for the month, respectively, according to data provided by S&P Global Market Intelligence.

So what

The airline business has been hit harder than most by the pandemic, with travel demand evaporating last March and only slowly recovering in the months since. The industry expects year-over-year travel in the fourth quarter to be down 65% or more, and every U.S. airline is currently bleeding cash.

There's no way that ends until the pandemic is under control, and investors in November cheered positive developments in the effort to get a vaccine to the public. Two vaccine candidates reported better-than-expected efficacy in the month, raising hopes that we might be near the beginning of the end of the crisis.

A plane flies above the clouds.

Image source: Getty Images.

Southwest is among the top operators in the industry, with a balance sheet that should allow it to be opportunistic as a recovery takes hold. The airline is already looking for bargains in the airplane market, negotiating with Boeing to potentially take planes that have been abandoned by other buyers.

Delta, too, is looking to differentiate itself, holding firm with limits on how full its cabins will be during a pandemic even as most of its rivals are removing caps. That's a risky strategy at a time when airlines desperately need revenue, but if we see the beginnings of a recovery early in 2021, the company should have ample cash to get buy even with reduced seating.

American, seen as the most vulnerable of the major airlines due to its debt, can least afford to see the crisis extend through 2021 and beyond. The company has plenty of cash to get by for now, and it's likely a popular choice among bargain hunters on Wall Street because the stock has fallen more than others during the pandemic.

LUV Chart

Airline data by YCharts

Now what

A vaccine is unquestionably good news for the airline business and should remove the threat that any of these U.S. airlines end up in bankruptcy. It also keeps the most reasonable bull case for the sector intact, because there's at least a chance most of the population will be vaccinated in time for what could be a very busy summer travel season in 2021.

Still, investors should be careful not to get ahead of themselves.

Even in the best-case scenario, travel demand will likely not return to prepandemic levels until mid-decade at best. More lucrative parts of the industry, including business and international travel, will likely recover slower than lower-margin leisure travel. And once revenue does recover, the airlines will mostly be focused on paying down some of the billions in new debt they have taken on during the pandemic.

For those with the patience to wait out a recovery, it's time to start picking winners. Southwest and Delta stand out for those interested in riding out the turbulence up ahead.