The billionaire investor Warren Buffett has sold all of his shares in four major U.S. airlines declaring that “the world has changed for the airlines” and that when he changes his mind on a business his Berkshire Hathaway investment vehicle doesn’t “take half measures”.
Buffett, who has a personal fortune worth an estimated $88 billion, confirmed during its annual shareholder’s meeting on Saturday, Berkshire Hathaway said it had sold its entire stakes in four U.S. airlines – the first time the event has been held virtually because of restrictions imposed as a result of the COVID-19 pandemic.
Since 2016, the Berkshire Hathaway conglomerate had invested approximately $8 billion in United, American, Delta and Southwest Airlines after years of avoiding the airline industry because of its volatility. The stakes ranged from 11 per cent in Delta, 10 per cent in both American and Southwest, and 9 per cent in United Airlines.
“The world has changed for the airlines. And I don’t know how it’s changed and I hope it corrects itself in a reasonably prompt way,” Buffett said during Saturday’s meeting. “I don’t know if Americans have now changed their habits or will change their habits because of the extended period,” he continued.
“I think there are certain industries, and unfortunately, I think that the airline industry, among others, that are really hurt by a forced shutdown by events that are far beyond our control,” Buffett explained.
“If we like a business, we’re going to buy as much of it as we can and keep it as long as we can… And when we change our mind we don’t take half measures.”
When asked a question about how much of his airline stakes had been sold, Buffett said he didn’t take half measures going on to explain that he had made the decision “basically even at a substantial loss”. Buffett continued: “We will not fund a company that — where we think that it is going to chew up money in the future.”
The airline industry has been slammed by the novel Coronavirus pandemic and is likely to suffer a long and drawn out recovery. U.S. airlines have witnessed passenger numbers plummet more than 95 per cent in just over a month and are losing tens of million of dollars a day.
Many aviation analysts and airline executives themselves don’t think passenger numbers will return to pre-Corona era levels until 2023 at the earliest. A second wave of the COVID-19 virus could push back that timescale even further.
“The real question is whether you need a lot of new planes or not,” Buffett said. Further underlying the point that passenger numbers may not recover for many years to come.
“I don’t know that three, four years from now people will fly as many passenger miles as they did last year,” he said. “You’ve got too many planes.”
