Warren Buffett says investing in airlines was a mistake

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Billionaire US investor Warren Buffett said, his company Berkshire Hathaway completely exited its stakes in the four major US airlines due to the covid-19 pandemic pushed the vaunted investment firm to $US49.7 billion ($77 billion) quarterly loss. The sales of shares of Delta Air Lines, Southwest Airlines, American Airlines and United Airlines made up most of the company's $US6.5 billion in equity sales in April. During his live streamed annual meeting Buffett said, the business has fundamentally changed following the economic fallout from the covid-19 pandemic. He declined to blame the performance of the airline executives saying they've done a good job of raising money to get through the crisis. Buffett said Saturday, the world changed for airlines and I wish them well. He clarified that he made the decision and that he lost money on his investments. That was my mistake.

Buffett's had a complicated relationship with the airline industry over the years. After a troublesome investment in US Air, Buffett joked that he would call an 800 number to declare he was an air o holic if he ever got the urge to invest in airlines again. The airline business and I may be wrong and I hope I'm wrong but I think it's changed in a very major way. The future is much less clear to me. Then in 2016, Berkshire dove into the industry again amassing stakes in the four largest US airlines. At the end of 2019 those stakes amounted to almost $US10 billion. Buffett's renewed faith in the industry prompted speculation that he might one day own one of the carriers. But now he's cut those investments again. Berkshire disclosed in April that it had at least trimmed its Delta and Southwest stakes both of which had previously been above a 10 per cent ownership level. Buffett said, the airline business and I may be wrong and I hope I'm wrong but I think it's changed in a very major way. The future is much less clear to me. The disclosure was among the most significant at the annual meeting which was notable for its different feel this year as the event that usually draws tens of thousands was done was hosted virtually. Buffett 89 shared the stage with a top deputy Greg Abel who runs Berkshire's non-insurance operating units.

Vice Chairman Charlie Munger 96 didn't join though Buffett said ,his longtime business partner was in good health. Buffett said, he didn't know how consumer travel habits will change after the pandemic subsides but any reduction in travel could leave airlines with higher than necessary fixed costs. Any impact could filter down to suppliers like Boeing Co. The real question is whether you need a lot of new planes or not. The efforts to slow the pandemic amounted to quite an experiment and while the range of public health and economic outcomes has narrowed, they remain enormous. He said, I don't know the consequences of shutting down large parts of the US economy though Berkshire's operating earnings will be considerably less than if the covid-19 hadn't hit. Buffett gave an extended history lesson to back up his assertion that nothing basically can stop America. He said he's still bullish on the US economy because it has overcome many obstacles over the past two centuries, though we haven't faced anything that quite resembles this.