What happened

The big bank failure over the weekend has investors asking serious questions about the health of the economy, and putting a large number of stocks far removed from banking under pressure.

Shares of major airlines fell on Monday morning on fears that the fallout from the failure of Silicon Valley Bank will cause the economy to weaken. JetBlue Airways (JBLU 3.39%) led the decline, down as much as 7.7% on Monday morning, with shares of Delta Air Lines (DAL -3.04%) and American Airlines Group (AAL -0.47%) down as much as 5% apiece.

So what

Airline investors have endured a range of headwinds in recent years, starting with the pandemic and carrying through to higher fuel prices and labor shortages. But few, if any, investors were focused on what a bank failure might mean to the sector.

But the collapse of SVB Financial Group's Silicon Valley Bank over the weekend is causing a massive rethink by investors on Monday morning. Government regulators moved quickly to try to minimize the damage caused by the collapse, but the markets traded down sharply at the open Monday due to the continued uncertainty.

Airlines have enjoyed strong demand since the introduction of COVID-19 vaccines, and so far that demand has held up well despite a period of rising rates and signs of an economic slowdown. The airlines headed into 2023 mostly focused on growth, and investors in recent months were just beginning to buy into the idea that perhaps the strong results reported in 2022 are sustainable.

Should the banking crisis ripple through the economy, all bets for growth are off.

The situation is particularly dangerous for JetBlue, which is in the process of trying to acquire Spirit Airlines (SAVE 3.57%). That deal is being scrutinized by antitrust authorities, creating a lot of uncertainty around JetBlue shares.

JetBlue is paying up for Spirit because it sees the airline as a way to jump-start growth by providing much-needed additional airplanes and pilots. Should the economy significantly weaken the reasoning behind the deal becomes more questionable, and JetBlue could end up saddled with a complicated and costly integration without getting the benefit of a growing economy.

Now what

For long-term investors looking at airline stocks, the best thing to do is try to block out Monday's noise. Yes, the bank failure and what comes next could have a significant impact on the economy. But that is far from certain, and likely unknowable for some time.

At times like these, panic-selling is hardly ever the right move. Even in the worst-case scenario these airlines are relatively healthy and should have some staying power in a recession, meaning the stocks are unlikely to be wiped out. And there is a chance this crisis could actually cause the Fed to slow or halt rate hikes, which could make it more likely that the economy remains strong and travel demand holds up through 2023.

Airlines have always been cyclical, and in years past it has paid to get out early if a downturn is coming. But American, JetBlue, and Delta all have substantial reserves and should be able to fly through whatever turbulence lies up ahead.