On Saturday, in a statement Warren Buffett, the Chairman of Berkshire Hathaway Inc said, Berkshire Hathaway had sold 100% stake in the four largest U.S. airlines in April, at the company’s annual general meeting wherein he said, “the world has changed” for the aviation industry.
As on Dec 31, 2019, Berkshire Hathaway had a 11% stake in Delta Air Lines, 10% stake in American Airlines Co, 10% stake in Southwest Airlines Co and 9% stake in United Airlines, according to company filings and its annual report.
Airline stocks have been hit significantly hard by the near collapse of U.S. travel demand midst the coronavirus pandemic. As a result, U.S. airlines have cut hundreds of thousands of flights, and have parked thousands of planes following U.S. travel demand falling by nearly 95%. Currently, there is no clear timetable for passengers to return to flights at pre-crisis levels.
“We made that decision in terms of the airline business. We took money out of the business basically even at a substantial loss,” said Buffett. “We will not fund a company that — where we think that it is going to chew up money in the future.”
On April 3, Berkshire had disclosed that it had sold around 18% of its stake in Delta and 4% in Southwest.
“Berkshire had invested around $7 billion or $8 billion amassing stakes in the four airlines including American Airlines Group Inc”, said Buffett. “We did not take out anything like $7 or $8 billion and that was my mistake,” said Buffett during the AGM which was livestreamed.
“I am the one who made the decision.”
Southwest, American and United declined comment.
In a statement, Delta said it was aware of the sale and has “tremendous respect for Mr. Buffett and the Berkshire team.” The airline went on to add 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.”
“It is a blow to have essentially your demand dry up…. It is basically that we shut off air travel in this country,” said Buffett.
“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.”