What happened

Airline shares are under pressure on Monday, weighed down by pessimistic news concerning the pace of both vaccine deployment and a new round of stimulus. There's hope 2021 will be better than 2020, but investors are under no delusion that the turnaround will be quick.

Spirit Airlines (NYSE:SAVE) fell as much as 5.8% midday on Monday, while shares of United Airlines Holdings (NASDAQ:UAL), American Airlines Group (NASDAQ:AAL), Southwest Airlines (NYSE:LUV), and JetBlue Airways (NASDAQ:JBLU) each fell more than 4% apiece.

So what

The airline industry was devastated by the pandemic, only surviving because airlines were able to raise billions in cash to offset significant losses as travel demand disappeared. There's hope for better days in 2021, but that is going to require widespread vaccinations and a healthy economy.

The question is how long will it take until we get there, and on Monday investors are digesting mostly negative updates. Airlines joined the broader markets in reacting negatively to reports out of Washington that a much-anticipated second stimulus plan would be delayed, raising questions about what lies ahead for the U.S. economy.

View of a plane taking off through the window of an airport lounge

Image source: Getty Images.

Airlines were also reacting to a couple of reminders that even with the positive news surrounding a vaccine rollout, there is still a slow, difficult battle up ahead. Merck announced it was discontinuing its COVID-19 vaccine development program following disappointing data from early trials. Moderna, meanwhile, said that while its existing vaccine does confer a strong immune response to new strains of COVID-19, it is testing an additional booster to ensure maximum effectiveness.

Neither of those headlines mean the bull case for a recovery is in jeopardy, but they are both setbacks. To get a recovery by next summer, we are going to need all the vaccine doses we can find, and Merck canceling its work means one less source of potential vaccines. And the Moderna headline, if nothing else, is a reminder that the vaccine is ever evolving and what seems like progress now could halt if additional shots are required.

Among the airlines, Spirit is expected to be one of the first to recover should leisure demand rebound in time for the summer vacation season. Any delays that might lead to another slow summer travel season take a lot of the wind out of the bull case for Spirit. Southwest, too, is expected to be among the first to recover, while United and American are two of the more vulnerable airlines that can least afford an extended downturn.

Now what

Interesting to note Delta Air Lines (NYSE:DAL), though down, is holding up better than most. Delta earlier in the month set an optimistic tone for the industry by calling 2021 a "year of recovery," and on Monday it said it is making plans to bring back some of the pilots taken off of active duty in the months to come.

The bottom line is that a recovery does appear to be at hand, but it is going to take most of 2021, if not longer, for conditions to normalize. Investors who want to buy in and wait out what is likely to be a choppy recovery should stick to top names like Delta and Southwest and do their best to block out the day-to-day headlines.

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.