Billionaire Warren Buffett Divests Airline Stakes, Sees No ‘Attractive’ Investments

Billionaire Warren Buffett said Saturday that its investment conglomerate Berkshire Hathaway (BRK.A) has sold all of its stakes in U.S. airlines after air travel was shut off in an effort to contain the fast spread of the coronavirus pandemic.

Buffett, who is a fond investor in the airlines industry, disclosed that Berkshire has divested its entire holdings in the U.S. four largest airline carriers: American Airlines Group Inc (AAL), United Airlines Holdings Inc (UAL), Delta Air Lines Inc. (DAL), and Southwest Airlines Co. (LUV).

“We made that decision in terms of the airline business. We took money out of the business basically even at a substantial loss […] and that was my mistake,” Buffett said. “We will not fund a company where we think that it is going to chew up money in the future.”

Buffett’s Berkshire, which has accumulated $137 billion in cash and cash equivalents, as of the end of the quarter, hasn’t invested in new ventures for some time.

“We have not done anything, because we don’t see anything that attractive to do,” Buffett, Berkshire Hathaway chairman and CEO, said at the company’s live-streamed annual meeting following its quarterly earnings release. “We are willing to do something very big. I mean you could come to me on Monday morning with something that involved $30, or $40 billion or $50 billion. And if we really like what we are seeing, we would do it.”

U.S. airlines have been burning through billions of dollars in the first quarter incurring huge losses and implementing cost-cutting plans as the coronavirus-related global lockdown orders have brought air travel to an almost complete halt.

Citigroup analyst Stephen Trent last week cut American Airlines’ price target to $10 from $13, while maintaining his Sell rating on the stock.

“In light of deep global uncertainties associated with COVID-19, American Airlines seems likely to eschew the standard guidance metrics such as revenue per available seat mile or RASM, CASM-ex, etc., in favor of more timely commentary on available liquidity, capital markets access, and cost reduction potential,” Trent wrote in a note to investors.

TipRanks data shows that overall Wall Street analysts have a Hold consensus rating on the stock based on 7 Sells, 6 Holds and 3 Buys. The $15.45 average price target implies 45% upside potential in the coming 12 months. (See American Airlines stock analysis on TipRanks)

Commenting on the magnitude and recovery potential of the coronavirus outbreak, Buffett expressed confidence that Americans will be able to endure the pandemic crisis as history has shown that prosperity followed, after crises such as the Civil War in the 1860s and the Great Depression.

“Nothing can stop America when you get right down to it,” Buffett said. “I will bet on America the rest of my life.”

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Sharon Wrobel
Sharon Wrobel is a journalist and writer with two decades of experience covering financial news in the U.S., Europe and the Middle East. Her work has appeared in global publications including The Financial Times, Bloomberg and The Jerusalem Post.

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