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Berkshire sells entire stakes in U.S. airlines: Buffett

Stock MarketsMay 03, 2020 07:50AM ET
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© Reuters. FILE PHOTO: Berkshire Hathaway Chairman Warren Buffett seen at the annual Berkshire shareholder shopping day in Omaha

By David Shepardson and Jonathan Stempel

(Reuters) - Berkshire Hathaway Inc (N:BRKa) sold its entire stakes in the four largest U.S. airlines in April, Chairman Warren Buffett said Saturday at the company's annual meeting, saying "the world has changed" for the aviation industry.

The conglomerate had held sizeable positions in the airlines, including an 11% stake in Delta Air Lines (N:DAL), 10% of American Airlines Co (O:AAL), 10% of Southwest Airlines Co (N:LUV) and 9% of United Airlines (O:UAL) at the end of 2019, according to its annual report and company filings.

The conglomerate was one of the largest individual holders in the four airlines and in 2016 disclosed it had begun investing in the four carriers after avoiding the sector for years.

Airline stocks have been hard hit by the near collapse U.S. travel demand amid the coronavirus pandemic.

U.S. airlines are cutting hundreds of thousands of flights, parking thousands of planes as U.S. travel demand has fallen by about 95% and there is no clear timetable for passengers to return to flights at pre-crisis levels.

Buffett said the airline industry's outlook rapidly changed.

"We made that decision in terms of the airline business. We took money out of the business basically even at a substantial loss," Buffett said. "We will not fund a company that -- where we think that it is going to chew up money in the future."

Berkshire disclosed on April 3 it had sold about 18% of its Delta stake and 4% of its Southwest shares.

Buffett said Berkshire had invested around $7 billion or $8 billion amassing stakes in the four airlines including American Airlines Group Inc (O:AAL).

"We did not take out anything like $7 or $8 billion and that was my mistake," Buffett said at the company's annual meeting which was livestreamed. "I am the one who made the decision."

Southwest, American and United declined comment.

Delta said in a statement it was aware of the sale and has "tremendous respect for Mr. Buffett and the Berkshire team." The airline added it remains "confident that the strengths that are core to Delta’s business – our people, our brand, our network and our operational reliability – will endure and position Delta to succeed."

Buffett said he previously considered investing in additional airlines.

"It is a blow to have essentially your demand dry up.... It is basically that we shut off air travel in this country," Buffett added.

Buffett previously expressed grim sentiments about the financial outlook for airlines. He did invest in USAir in 1989.

"If a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down," Buffett wrote in his 2007 annual letter. "Investors have poured money into a bottomless pit, attracted by growth when they should have been repelled by it."

Berkshire sells entire stakes in U.S. airlines: Buffett
 

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Comments (61)
Prakash J Chaudhari
Prakash J Chaudhari May 05, 2020 5:46PM ET
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Buffett would have accumulated more airline stocks , ve ause when everyone is running away- you buy it. What happened??
Alex Cavasin
Alex Cavasin May 05, 2020 7:06AM ET
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buy&hold! buy high and sell at the bottom. hats off to the guru
Donald Hart
Donald Hart May 04, 2020 7:23PM ET
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Been out of airline stocks since 2001!
Jeff Gordon
Jeff Gordon May 03, 2020 11:14PM ET
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he doesn't have a clue like the rest of us
Srinu Angajala
Srinu Angajala May 03, 2020 11:14PM ET
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that's why he become billionaire like rest of us?
Srinu Angajala
Srinu Angajala May 03, 2020 11:05PM ET
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More likely Buffett will reinvests in Tech company stocks, which are looking better in earnings compared to other sectors, to make up his 1Q losses. It is very common investor principle to cut losses in something but recoupe in something else
maga king
maga king May 03, 2020 11:05PM ET
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has buff ever succeeded in investing in tech lol.
Srinu Angajala
Srinu Angajala May 03, 2020 11:05PM ET
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Apple and Microsoft were his choices which are still sturdy compared to other sector stocks.. FB, Google are other ones to consider too. Tech will do better in 2Q, 3Q compared to Airlines, Banking, Oil & Gas etc..
Fabio falec
falec May 03, 2020 11:05PM ET
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But they have already appreciated quite a lot. Not much margin to make money...
Nigel Ng
TradePA May 03, 2020 10:51PM ET
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I had a hard time wondering why he was still in airlines... i was having a 2nd thought that he is smart and i may be the wrong one. But i was right. Now i am wondering why he is still holding all the banks. If this is a depression that last longer than anyone expected, meaning that interest rate is gonna stay low for a long time, banks are all gonna suffer. If corona virus stays longer, debt will be defaulted and banks will suffer too.
maga king
maga king May 03, 2020 10:40PM ET
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too old and too greedy finally bites lol
Tony Montana
Tony Montana May 03, 2020 10:36PM ET
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he knows something I don't know
fernando pimentel
fernando pimentel May 03, 2020 9:23PM ET
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the old man is a fool
Haresh Chandwani
Haresh Chandwani May 03, 2020 8:39PM ET
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This is only the beginning 9f Warren Buffet's selling spree!
Dean Jayes
Dean Jayes May 03, 2020 7:04PM ET
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The bigger airlines will be stronger after all is said and done while smaller ones will sell or fold.
Dean Jayes
Dean Jayes May 03, 2020 6:57PM ET
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Who benefits most if he tanks the airline stocks with his comments? Warren Buffett has had ulterior motives in the past. He wouldn't have made a comment like this when everyone knew this information while the airlines were tanking in March. Keep in mind, most of these airline stocks are down 50-60% from their 52 week highs already. Market knows the risk already. Expect 4-5 year recovery about 30% of that 50-60%. Still has a 5% yoy profitability.
Fabio falec
falec May 03, 2020 6:57PM ET
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He has sold, I bought.
Pwr Strk
Pwr Strk May 03, 2020 1:37PM ET
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Buffet never understood the airline industry. What did you expect from a guy who doesn't even likes to fly? He was always a too conservative old schooler coke-drinker-for-a-rush type of an investor. Long live his legacy but the market has moved on.
Pwr Strk
Pwr Strk May 03, 2020 1:28PM ET
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Btw people, Buffet's airline dump all happened early and mid April. Any effect was already digested into prices long time ago. DON'T MISS OUT on the airline recovery!!!
Sergio Marin
Sergio Marin May 03, 2020 1:28PM ET
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Sounds like an owner of airline stocks..
Stanislav Ivanovskiy
Stanislav Ivanovskiy May 03, 2020 1:28PM ET
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Time will decide
Fabio falec
falec May 03, 2020 1:28PM ET
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Well, I just bought airlines. Do you think nobody will use airplanes anymore? XD
Pwr Strk
Pwr Strk May 03, 2020 1:28PM ET
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Fabio falec  you've bought at the right time... i was reading some reports traffic is already revamping with the opening and restrictions easing on many states. and btw airlines have not stopped flying, they only reduced their capacity by the numbers you've heard
Fabio falec
falec May 03, 2020 1:28PM ET
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Pwr Strk Nice to see someone with my same point of view.
Midway Eholdings
Midway Eholdings May 03, 2020 1:06PM ET
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Your time is up old man.
Joanna Yin
Joanna Yin May 03, 2020 12:04PM ET
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Bottomline is that he is questioning on V shape recovery.
Joeri Willems
Jurinho May 03, 2020 12:04PM ET
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lets see in 2 months what your V will look like then. pretty obvious that the real impact is in q2. and thats where we are now so dont expect this upward trend to last
Joshua James McCann
Joshua James McCann May 03, 2020 11:26AM ET
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He probably sees a lot more pain ahead for the sector and it was time to cut the losses.
eyal isaac
eyal isaac May 03, 2020 11:26AM ET
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airline's will raise prices accordingly in order to survive
Pwr Strk
Pwr Strk May 03, 2020 11:26AM ET
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not with half full seats
Fabio falec
falec May 03, 2020 11:26AM ET
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So, you won't use airplanes anymore like many others for years and years to come? Insane!
Silverbug 19
Silverbug 19 May 03, 2020 11:07AM ET
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Why is it money when Govt creates $2T, but not if it creates $20t for everyone?
maga king
maga king May 03, 2020 10:15AM ET
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saw so many vaccines believers here. brainwashed to the fullest extent!
maga king
maga king May 03, 2020 10:12AM ET
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he just said he was bullish. now he sold all his stakes in airlines lol. what a hypocrite
Joshua James McCann
Joshua James McCann May 03, 2020 10:12AM ET
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Market conditions can change one's mind really quickly.
Fabio falec
falec May 03, 2020 10:12AM ET
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He said, long term investors shall hold their stocks. Probably he can't see much long term anymore tough! XD
Jon Buh
Jon Buh May 03, 2020 9:47AM ET
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Airline stocks are already at bottom. it may take long long time to get back to ATH but it will bounce enough to make good profits if u buy now. Only fear is will they bankrupt or not before recovery but if gov is bailing them out..u know what u gotta do
eyal isaac
eyal isaac May 03, 2020 9:47AM ET
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correct, like buying bank stocks back in 2009
ali bakr
ali bakr May 03, 2020 9:47AM ET
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I bet a new bottom on Monday.
Jake Robatel
Jake Robatel May 03, 2020 9:47AM ET
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What about the oppourtunity cost of that time? I dont doubt they will recover but after 9/11 it took 16 years. First 11 of which was pretty flat w/ a few more mini crashes mixed in.
jt nyxi
jt nyxi May 03, 2020 8:57AM ET
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I am sorry but EU is opening up tomorrow. How can this be bad for an airline given where they are today? Unless now buffet is telling us stocks are looking in the present or the past. I thought stocks looked 3 months ahead, thus the huge drop. Can the make up their minds at least. All they're doing is trying to figure out Trump and the Fed who own this casino.
Richard Rama
Richard Rama May 03, 2020 8:24AM ET
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How does 10% become entire stakes??
saifullah khan
saifullah khan May 03, 2020 8:24AM ET
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They mean his entire stake. All 10%
Jay Es
Jay Es May 03, 2020 8:24AM ET
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That’s his entire stake. Which was 10% of the company.
Noel Amparo
Noel Amparo May 03, 2020 8:00AM ET
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Of course we will all fly again. I will fly myself. Warren Buffett is just looking at the profitability perspective. Airlines are taking more and more debt and historically always flying with tight operating margins. Maybe it wasn't really his style to own Airlines at first place, given the risks involved... and this situation may have made him realise it, that is why he said it was his mistake at first place. We all think differently, we all have different investment strategy. We all make mistakes based in our own perspective.
eyal isaac
eyal isaac May 03, 2020 7:39AM ET
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Buffett was wrong on o.x.y wrong on bank of America wrong on Teva and the list goes on..he is not a god ,and makes investing mistakes like the rest of us...
Rick Lai
Rick Lai May 03, 2020 7:39AM ET
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Buffett now still have US 140,000,000 ,000 cash on hand, he is King.
Space Lord
Space Lord May 03, 2020 7:39AM ET
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Rick Lai  Buffet don't have even 10M. It’s a big myth about his cash , that designed for hamsters
 
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