What happened

Friday was a gloomy day on Wall Street, with the S&P 500 index falling nearly 2%. Airline shares underperformed the indexes, with United Airlines Holdings (UAL 3.32%), American Airlines Group (AAL -0.38%), Delta Air Lines (DAL 1.16%), and Hawaiian Holdings (HA 1.91%) all closing down more than 5%.

So what

Airline stocks took it on the chin in 2020, with the pandemic causing travel demand to evaporate and pushing the entire industry into the red. As we said yesterday, fourth-quarter earnings have come in largely as dismal as expected, and investors right now are more focused on trying to figure out how soon a recovery might take hold.

Most of the news on Friday was negative. In a memo to employees obtained by Reuters, United said it could furlough up to 14,000 employees when government payroll support expires on April 1, saying that "despite ongoing efforts to distribute vaccines, customer demand has not changed much."

An airline landing at night.

Image source: Getty Images.

The industry won a reprieve from layoffs and furloughs in December when Congress approved a new $15 billion payroll support package, but absent a rebound in revenue, the industry cannot afford to maintain pre-pandemic staffing levels.

American, meanwhile, filed to take advantage of a recent run-up in its stock price that appears influenced by factors not specific to the company. The airline said in a regulatory filing it intends to sell as much as $1.1 billion in stock in an at-the-market offering, with proceeds set to bolster its liquidity position and for other corporate purposes.

Hawaiian's Friday fall follows a jump on Thursday, leaving the stock nearly unchanged over the two days. The airline has done what it can to weather the crisis, but with international flights expected to rebound last and its home state at times imposing harsh quarantine restrictions on visitors, there is only so much the airline can do to bounce back for now.

Delta had no company-specific news on Friday, but after opening earnings season on a high note last week, the stock has been steadily drawn down as investors digest how long a recovery will take.

Now what

The news from both American and United, while not ideal, shouldn't actually be bad for long-term holders. More shares mean dilution, and often put pressure on a stock, and furloughs are never to be celebrated. But both actions are a reminder these companies are doing what they must to survive, and should indeed be able to get through the crisis without bankruptcy.

The question, as always, is how long investors have to wait to see the upside. Part of the weakness in the shares is that while the vaccine has given us reason to start looking for an answer to that question, we are no closer to knowing for sure than we were back in November.

With any luck, we'll start seeing signs of a recovery in the months to come, as more people are vaccinated and tourists begin to make summer vacation plans. But given the uncertainty, investors would be wise to stick to top operators like Delta and Southwest Airlines and not to speculate too much on a recovery.