What happened

During the early months of the coronavirus pandemic, American Airlines Group's (NASDAQ:AAL) shares were among the most volatile in the sector, gaining as much as 40% in a single trading day back in June on a small piece of good news.

The stock displayed similarly mercurial behavior on Monday as well. While other airline shares were flying fairly level, American traded upward by as much as 10%, despite a lack of company-specific news. As of 2 p.m. EST, it was up by about 6%.

So what

The passenger airline business has been hit hard by COVID-19; industry revenue in 2020 is expected to fall by 65% or more. American Airlines has been feeling the pain more acutely than most, as its debt load -- the highest among the U.S. carriers -- made it particularly vulnerable.

A Boeing plane on the tarmac.

Image source: American Airlines.

The stock fell nearly 75% in the early days of the pandemic, but slowly crept back upward as the initial lockdowns lifted. Its climb accelerated in November due to positive news concerning potential COVID-19 vaccines.

Based on that vaccine news, the market can have a rough idea of when the worst of the pandemic will be over, and with that comes an increasing level of confidence that American Airlines has enough cash on hand to ride out the crisis. Its stock underperformed that of its healthier rivals like Delta Air Lines and Southwest Airlines in the first half of the year, but emboldened investors lately have it outperforming its peers and beginning to close the gap.

LUV Chart

Airline data by YCharts

Now what

The news flow is improving, but investors should remain cautious. American is a survivor, but it will take years to rebuild its bruised balance sheet even after passenger traffic returns to near normal levels.

In the meantime, expect rivals with healthier finances to make life difficult for American. Southwest has already gone on the offensive, and other discounters are likely to take advantage of their lower costs to try to lure away customers in the quarters to come.

American Airlines stock is now safe to own, as the vaccine developments make a bankruptcy highly unlikely. But relative to other airlines, it still looks like a laggard. Investors should be cautious about getting too excited over incremental gains in the months to come.

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.