Berkshire Hathaway exits airlines

Warren Buffett’s Berkshire Hathaway has sold all its holdings in four U.S. airlines with Buffett himself citing the high degree of uncertainty about the future of the industry.

Thomas Franck and Leslie Josephs from CNBC reported:

Berkshire Hathaway Chairman and billionaire value investor Warren Buffett said that the conglomerate has sold the entirety of its equity position in the U.S. airline industry. The prior stake, worth north of $4 billion dollars in December, included positions in United, American, Southwest and Delta 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,” he said during Berkshire’s annual shareholder meeting Saturday, which was virtual this year. “I don’t know if Americans have now changed their habits or will change their habits because of the extended period.”

But “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,” he added.

The BBC reported:

The US travel industry has almost collapsed as a result of the coronavirus pandemic, with airlines cutting hundreds of thousands of flights and taking thousands of planes out of service.

Mr Buffett said he had been considering investing in additional airlines before the pandemic hit.

“It is a blow to have, essentially, your demand dry up,” he said. “It is basically that we shut off air travel in this country.”

In a statement, Delta said it was aware of the sale and has “tremendous respect for Mr Buffett and the Berkshire team”.

The airline added that it remains “confident” in its strengths.

MarketWatch’s Mark DeCambre wrote:

Subsidiaries of Berkshire sold 13 million Delta shares for a total of $314.2 million and 2.3 million Southwest shares amounting to more than $74 million, as he looked to substantially scale back his ownership of the airlines sector which has been devastated by stay-at-home protocols that have been put in place since the coronavirus epidemic took hold of the world over the past three months.

Buffett, however, explained that his company and its subsidiaries have now unloaded their entire stake in airlines.

Buffett explained at the meeting that he thought he was getting roughly 10% of the four largest airlines for an attractive price. He also owned stakes in American Airlines Group Inc. AAL, -11.40% and United Airlines Holdings Inc. UAL, -10.00%. Collectively, those airlines, represent some 80% of the passenger miles flown in the U.S., Buffett said.

But he determined recently that his decision, in light of the emerging pathogen, was ill-advised and he sought to unload his position: “I just decided that I’d made a mistake.”