Apparently Buffet figures it will be many years for an airline comeback.
Just remember "Life is made up of the things that happen when you were expecting something else to happen."
Many other changes coming our way.- Tom
Airlines will come roaring back by Chinese New Year next year. Guaranteed.
Warren Buffett told investors Saturday that Berkshire Hathaway has sold its entire stakes in the four largest U.S. airlines -- American, Delta, Southwest, United -- as the pandemic upends another bet on the sector that the famed investor had shunned for years before a surprise return in 2016... An embittered Buffett said in 2007 investor letter: “If a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down” and referred to a soured bet on US Air in the 1990s.
Airlines have always been a feast-famine business, moreso than other sectors (like hotels and petroleum products) with an entertainment angle and which rely on a good economy and stable costs (that's what made me want to include petroleum products in there).
Selling airlines when they're down is probably a dick move, uniless you take seriously Elon Musk's plan to fire passengers across the Pacific and everywhere else in a rocket (I don't).
Other sectors will probably bounce back first (including amusement parks, some other resorts, some hotels) but any airline that is currently trading at a multi-year low is worth analyzing. It's cheap now, if you have a reasonable guess that it won't be in a year, it's likely that fund managers and so forth who do this professionally won't wait until then.
It's worth pointing out that the Oracle of Omaha tends to bet big on companies which are analogous to buggy-whip manufacturers.
That said, I believe there are regions of lower populace that could re-open right now. Who knows, maybe the Dakotas, Wyoming, Utah, and certain mid-west States could experience huge growth, while NY, CA, NJ, Ill, sink into oblivion. This could be a complete economic restructuring of our nation.
This is an America and world changer on a macro-economic level.
Warren Buffett lost over $1billion trying to run up the price of oil while Bush was president in an election year
Those who have to travel will take planes. You might be able to do a vacation by car for 6 to 12 Hour drive but not for meetings or other personal appearances.
And you can’t drive overseas and even internationally is difficult.
“as the pandemic upends another bet on the sector that the famed investor had shunned for years before a surprise return in 2016. “
there’s no fool like an old fool: airlines have been losing money for at least 40 years, that’s why so many have gone bankrupt and/or merged and then gone bankrupt.
I guess Buffet with all his billions and political influence couldn’t figure out how to get government bailouts for the airlines.
Isn’t it the case that the collective long term performance of the Airlines is no return on investment?
Of course Boeing made lots of money selling the vehicles.
Even in the best of times, the airlines’ profit margin is in the single digits, usually around 3% or so. It’s often said that on a full flight, the last passenger or two can represent the entire profit for that flight. This obviously varies depending upon the destination, aircraft type, etc., but you get the point.
And there has been no shortage of wealthy people over the years since deregulation who thought that starting an airline would be “really neat.” Almost all of these attempts ended in bankruptcy and liquidation. Airlines are the classic case of making a small fortune by starting out with a big fortune.