The stock market opened the new week on a down note on Monday, although some portions of the market managed to avoid the full brunt of declines and clawed their way back over the course of the morning. Investors seem a bit nervous about volatility in the market overall, along with rising interest rates and oil prices that could accompany a full-on economic recovery.

As of just before noon EST, the Dow Jones Industrial Average (^DJI -0.91%) had managed to claw itself into positive territory, rising 25 points to 31,519. However, the S&P 500 (^GSPC -0.52%) fell 19 points to 3,887, and the Nasdaq Composite (^IXIC -0.28%) moved sharply lower by 215 points to 13,659.

Even as red-hot tech stocks led the Nasdaq lower, some sectors of the market did quite well. Indeed, in the once beaten-down airline stock sector, three stocks managed to set new 52-week highs, marking a full recovery from the ravages of the COVID-19 pandemic on their industry.

Airline lobby with rows of empty seats and gate markings.

Image source: Getty Images.

Flying higher

Shares of airlines were up broadly across the board on Monday morning. Among them, the following three stocks managed to set new highs over the past year:

  • Southwest Airlines (LUV -5.56%) was higher by more than 4%, marking a gain of greater than 20% just since the beginning of the year.
  • Hawaiian Holdings (HA -0.37%) picked up almost 6% on Monday morning, bringing its year-to-date gains to more than 50%.
  • Finally, Alaska Air Group (ALK -3.79%) climbed 4%. The airline stock is up by greater than 30% so far in 2021.

What all three of these airlines have in common is that they're primarily focused on the domestic U.S. market. Southwest offers limited service to Latin America and the Caribbean, while Hawaiian connects countries around the Pacific Rim to Honolulu, and Alaska flies to Canada, Mexico, and Costa Rica. However, their U.S. routes are much more extensive and important for their overall revenue.

With coronavirus vaccines getting distributed more widely, investors are growing more optimistic at the prospects of air travel returning to normal. Indeed, many believe that travel could actually surge once it's completely safe to do so because pent-up demand has kept people at home longer than they wanted. It's possible that airlines could make back some of their losses due to full planes once the all-clear sounds.

Are the big carriers next?

That news should be good for major carriers Delta Air Lines (DAL -2.23%), American Airlines Group (AAL -14.66%), and United Airlines Holdings (UAL -1.74%) in the long run. However, they have more extensive international route maps, and it's likely to take a lot longer for global travel to open up than it will for domestic travel inside the U.S. market.

Those airlines have jumped back considerably from their past pain, but they still have some work to do to reach 52-week highs. Delta is about 16% below where it traded this time last year, while American is down 25% and United is off 34%. In the minds of many investors, though, that just gives Delta, American, and United more room to rise in the long run if conditions return to normal.

Airlines have struggled, and it'll take a considerable amount of time for the industry to get back to any semblance of normalcy, even if the pandemic gets under control soon. Investors, though, are anticipating the best, and that could keep sending airline stocks sharply higher in the future.