US airline stocks tumble after Buffett sells stakes

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KEY POINTS
  • Airline shares fell sharply again, this time after Warren Buffett cashed out of his stakes in the four largest U.S. carriers.
  • US airlines recently posted their biggest quarterly losses in years because of the coronavirus pandemic.
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U.S. airline shares tumbled again on Monday, this time after Warren Buffett said Berkshire Hathaway sold its entire stakes in the four largest U.S. carriers as coronavirus devastates travel demand.

Berkshire was among the largest investors in the four — AmericanDeltaSouthwest and United. Buffett announced on Saturday that the firm dumped those shares. Berkshire posted a net loss of close to $50 billion in the first three months of the year.

American fell 7.7%, Delta fell 6.4% and United dropped 5%. Southwest fell 5.7%.

Buffett had long shunned airlines. In a 2007 shareholder letter, he said investors in those businesses “poured money into a bottomless pit, attracted by growth when they should have been repelled by it.”

But he returned in 2016 with a surprise bet on the four carriers as the industry was enjoying steady profits and the benefits of strong travel demand and lower fuel costs than in previous years.

The four last month posted their first quarterly losses in years and warned of a slow recovery in demand from prepandemic levels. Delta’s CEO said it could take two to three years.

“I mean, believe me, no joy being a CEO of an airline,” Buffett said at Berkshire’s annual meeting, held virtually this year because of the pandemic. “But the companies we bought were well managed. They did a lot of things right.”

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