Warren Buffett dumps US airline stocks, saying ‘world has changed’ after Covid-19
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.
Buffett confirmed Berkshire has sold its roughly 10 percent stake in the four largest airlines because the ‘world has changed’ for the industry.
In the same meeting, Buffett urged investors to hold onto stocks in businesses they like and to ‘never bet against America’ despite the mounting concerns over the long-term impact the virus is wreaking on the economy.
More than 30 million Americans have lost their jobs since the outbreak began and gross domestic product plummeted 4.8 percent in the first quarter alone, officially plunging the US into its first recession since 2008.
The airline industry has been one of the hardest-hit by the pandemic as borders closed, the federal government banned flights to and from some nations and stay-at-home orders have left the few planes still operating empty of passengers.
Berkshire Hathaway had held sizeable positions in the major US airlines, including an 11% stake in Delta Air Lines, 10% of American Airlines, 10% of Southwest Airlines and 9% of United Airlines at the end of 2019, according to its annual report and company filings.
But with thousands of planes parked on tarmac across the world and no clear timetable for the resumption of air travel, Buffett said he had sold his stocks as the airline industry’s outlook rapidly changed.
“We made that decision in terms of the airline business. We took money out of the business basically even at a substantial loss,” Buffett said. “We will not fund a company … where we think that it is going to chew up money in the future.”
‘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 Saturday’s meeting, often dubbed Woodstock for Capitalists, which was held virtually.
Shares of Delta, the largest airline by market capitalization, were down 59% in the year to date, United Airlines were off nearly 70% so far this year, Southwest was down by about 46% thus far in 2020,and American Airlines was off 63% over the same period, as of Friday’s close.
An exchange-traded fund that tracks the industry, U.S. Global Jets ETF JETS-7.24% was down by more than 55% in the year to date.
By comparison, the Dow Jones Industrial Average DJIA-2.55% was off 17% so far this year, after recovering much of its March decline in April.
The S&P 500 SPX-2.81% was looking at a year-to-date loss of 12.4% and the Nasdaq Composite Index COMP-3.2% was down 4.1% so far in 2020.
U.S. airlines last month started receiving portions of $25 billion in federal grants and loans that require them not to lay off or cut pay rates of workers through Sept. 30. Major airline executives this week warned they will have to shrink to manage through the crisis.