Famed investor Warren Buffett caused a stir on the weekend when he announced that his holding company, Berkshire Hathaway (NYSE:BRK.A), sold its entire stake in U.S. airlines.
Shares in all major American carriers were sharply lower Monday after Warren Buffett said at Berkshire Hathaway’s annual shareholder meeting that the company sold its positions in the four largest U.S. carriers as the coronavirus pandemic decimated international travel demand.
Berkshire Hathaway had been among the largest investors in the four U.S. carriers — American (NASDAQ:AAL), Delta (NYSE:DAL), Southwest (NYSE:LUV) and United (NASDAQ:UAL) — but the firm dumped those shares in early April as the impact of the pandemic became clear. Berkshire posted a net loss of close to $50 billion in the first quarter of the year.
American and United shares were each down more than 12% in pre-market trading Monday. Delta was down more than 11% and Southwest was off about 10%. Buffett had long avoided airlines and in a 2007 shareholder letter said investors in those businesses "poured money into a bottomless pit."
But he returned to airlines in 2016 with a surprise bet on the four biggest U.S. carriers as the industry was enjoying steady profits and the benefits of strong travel demand and lower fuel costs than in previous years.
Those four airlines last month posted their first quarterly losses in years and warned of a slow recovery in demand from pre-pandemic levels. Delta’s CEO said it could take two to three years for carriers to recover. Most U.S. airlines have also taken federal loans in recent weeks which will need to be repaid in the coming years.
