Market Overview

Here's Every Time Buffett Has Bashed Airline Stocks

Here's Every Time Buffett Has Bashed Airline Stocks

After shunning airline stocks, thanks to his burning fingers with his 1989 investment in US Airways Group (previously traded (NYSE: LCC)), then known as USAir, billionaire investor Warren Buffett seems to have made a reassessment of his stance.

The result? Betting big on some of the biggest airline stocks.

Buffett/Berkshire Hathaway Bet Big On The Skies

The latest Form 13F regulatory filing revealed a 21.8-million-share stake in American Airlines Group Inc (NASDAQ: AAL) as of September 30. Buffett's Berkshire Hathaway Inc. also picked up 6.33 million shares of Delta Air Lines, Inc. (NYSE: DAL) and 4.53 million shares of United Continental Holdings Inc (NYSE: UAL), the filing also showed.

By value, the largest stake was in American Airlines, to the tune of about $797.02 million. While in Delta, his stake was worth $249 million and in United Continental, $237.85 million.

A CNBC report, citing Buffett, said the billionaire has also since then picked up a stake in Southwest Airlines Co (NYSE: LUV) post September 30.

Is the airline sector poised for a smooth take off? Buffett's investments answer the question in the affirmative. The NYSE Arca Airline Index is up about 18 percent in the year-to-date period, as investors see an inflection point for the sector following months of underperformance in metrics such as revenue per available seat mile.

Buffett's Earlier Airline Stock Statements

  • In 1989 following his investment debacle with USAir, he complained about the "kamikaze pricing tactics of certain carriers," and said of the industry, "It's impossible to be a lot smarter than your dumbest competitor."
  • At a May 2013 annual shareholder meeting, Buffett said the sector has been a death trap for investors.
  • In response to a query by value investor Bill Miller as to whether he would consider buying airline stocks against the backdrop of industry consolidation and rising pricing power, Buffett said, "Investors have poured their money into airlines and airline manufacturers for 100 years with terrible results."
  • CNBC also reported of a 2007 argument he had made against investing in the industry. "The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, then earns little or no money. Think airlines. Here, a durable competitive advantage has proven elusive since the days of the Wright brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down," CNBC reported citing Buffett.

At Time Of Writing ...

  • American Airlines was up 2.83 percent at $44.63.
  • Delta was up 0.53 percent at $47.72.
  • Southwest Airlines was adding 1.79 percent at $46.16.
  • United Continental was rising 2.59 percent at $64.57.

Image Credit: By USA International Trade Administration ( [Public domain], via Wikimedia Commons.


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