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Warren Buffett dumps airlines, looks for new options

Airline stocks

Warren Buffett, the chief executive of Berkshire Hathaway, says he pulled out all of the stock investments from four airlines as the investment firm reported a $50bn loss in the first quarter.

Speaking at the annual shareholders’ meeting, the world’s most famous investor said he was wrong about airlines and claims that the world has changed after the coronavirus. Buffett’s Berkshire Hathaway had invested significantly in the top four American airlines over the past four years.

Warrenn Buffett

The shares sales of Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), Southwest Airlines Co (NYSE: LUV), and United Airlines Holdings (NASDAQ: UAL) made up the majority of Berkshire’s $6.5bn in equity sales in April.

“We made that decision in terms of the airline business. We took money out of the business basically even at a substantial loss,” Warren Buffett said during the virtual address to shareholders.

Buffett believes each airline company will need business loans of $10bn to $12bn to continue business operations, and in some cases, they will have to depend on stock sales. The airline companies are not attractive anymore, he added.

“I don’t know whether two or three years from now that as many people will fly as many passenger miles as they did last year. They may and they may not, but the future is much less clear to me about how the business will turn out through absolutely no fault of the airlines themselves,” Buffett said.

Berkshire ended the first quarter with more than $137bn in cash because Buffett said they have not yet found any attractive investment opportunity despite the massive stock market collapse.

However, Buffett backs up his claim that “nothing basically can stop America.”

Berkshire Hathaway currently owns almost 90 companies, including the big stakes in railroad and utility, insurance, jewellery, and furniture businesses. Its biggest investments include Apple (NASDAQ: AAPL), American Express (NYSE: AXP), Coca-Cola (NYSE: KO), and Bank of America (NYSE: BAC).

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.