What happened

Airline investors looking for signs of a post-pandemic recovery got some positive news on Friday, and stocks are reacting accordingly. Leading the way were shares of United Airlines Holdings (NASDAQ:UAL), American Airlines Group (NASDAQ:AAL), and Spirit Airlines (NYSE:SAVE), which were each up more than 5% apiece.

So what

Airline stocks endured a miserable 2020, as the pandemic wiped out demand for travel and sent the entire industry into the red. There is no chance of a recovery until travel patterns normalize, and that is going to take progress toward beating the pandemic.

The news from health sources was positive on Friday, with Pfizer and BioNTech saying the vaccine they developed generates robust immunity after only one dose and is easier to store than once thought. That news offers hope that more people will be able to get the vaccine sooner.

A plane taking off

Image source: Getty Images.

New COVID-19 case numbers have dropped in recent weeks as well. Meanwhile, recent Transportation Security Administration data suggests more people are flying, with more than 900,000 travelers on certain days this week. Add talk of an accelerating economy, and investors are getting more optimistic that we will see an influx of travel demand by summer, if not before.

Airlines are hinting at business as usual as well. American and JetBlue Airways (NASDAQ:JBLU) are beginning to roll out flights as part of their new alliance, and United on Friday announced a Boston-to-London flight designed to fight back against an American-JetBlue encroachment of its Newark, N.J., hub. No investor wants to see a price war, but the idea that the airlines are adding flights and fighting for market share after a year mostly focused on survival is arguably a positive development for the industry.

Spirit is a stock to watch because the discount airline, with its industry-low costs and focus on leisure travel, appears ideally positioned to be among the first in the industry to bounce back. If pent-up demand for vacation travel does lead to a busy summer season, Spirit should do well.

Now what

Even if leisure travel demand does return in the months to come, airlines are not expecting business and international travel to normalize for years. That's unfortunate, as business and international travel tends to be more lucrative for airlines like American and United.

Investors need to remain cautious, but without a doubt the current trends suggest the worst is behind us. For those interested in buying into a potential recovery, I'd suggest focusing on top operators like Southwest Airlines (NYSE:LUV) and Delta Air Lines (NYSE:DAL) or companies like Spirit that are well positioned to rebound ahead of some of its rivals.

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.