It’s an odd and frustrating time to be invested in airlines but perseverance could yield rewards. The sector faces so many hurdles at present, yet we could be facing one of the biggest travel booms in a very long time once the pandemic is brought under control.

Currently we’re all stuck at home, still dreaming of being able to hop on a plane to a warm climate and enjoy a relaxing break. Each day seems to bring more setbacks and some people are beginning to view 2021 as another write-off year for being able to do what they want.

The Covid vaccinations hold the key to reopening society and while there is progress on that front for 70-year-olds and above in the UK, it’s looking more realistic that a much larger part of society won’t get the jabs until much later this year.

Stock markets are forward looking and have already priced in the reopening trade for some airlines, rather than waiting for it to happen. Because of these high expectations, some investors are overreacting to the slightest bit of bad news which other investors might want to use to their advantage, if they believe it to be a short-term issue and not detrimental to the investment case.

For example, comments on 22 January that Spain won’t welcome tourists until 70% of the country is vaccinated caused another sell-off in airline and holiday stocks including a 7% drop in Jet2 (JET2:AIM) on the day.

These large share price movements could be explained by investors worrying about short-term cash flows for airlines. Headlines such as the one about Spain could put people off booking at what is normally a busy time of the year for snapping up holidays. A lot is riding on foreign countries being efficient with the vaccine rollout but investing in a stock is about taking a much longer-term view.

The direction of travel looks to be a mandatory requirement for proof of vaccination before travelling on a plane or cruise ship.

While initially a hassle, it makes perfect sense and isn’t really that different to places like South Africa which already requires all travellers coming from yellow fever risk countries to show proof of yellow fever vaccination.

Having such rules in place could provide reassurance to other passengers that they are not travelling with unvaccinated individuals.

Looking at share price movements since last year’s sell-off, the market is judging Jet2 as being one of the potential winners post-Covid, given how its shares have soared by 300% from the market low in March 2020.

International Consolidated Airlines (IAG) was lagging the pack but has seen strong share price gains in recent months. Financial liquidity has become less of a concern for investors than earlier in the pandemic after the British Airways owner raised a lot of cash and debt, but heavy exposure to business travel is a lingering issue as that market could take longer than leisure travel to recover.

The big question for investors is whether analysts have grossly underestimated the scale of demand for consumers to travel once vaccinated. I certainly think this is possible. If so, it means that even the airline stocks that have already done well since March 2020 have room to go much higher, though it could be a choppy ride.

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