The pandemic has emptied airports. Photo: BBC / Getty
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For “the Omaha Oracle,” Warren Buffett, one thing is clear: the aviation industry is no longer a good investment because of the covid-19 pandemic.
The billionaire American investor announced this weekend that his Berkshire Hathaway company had divested itself of all the shares it held in the four major US airlines.
“The world has changed (due to the coronavirus)”Buffett explained during the annual shareholders’ meeting.
Then he admitted that he had been wrong to invest in the aviation industry.
Buffett’s comments came just hours after Berkshire Hathaway to announce record loss in first quarter of year of $ 50 billion, according to reports from the Reuters news agency.
The conglomerate had an 11% interest in Delta Air Lines, 10% in American Airlines, 10% in Southwest Airlines, and 9% in United Airlines, according to the annual report and its tax returns.
The “Buffett effect”
Buffett’s company has had a complicated relationship with the aviation industry.
After a complicated investment in USAir, Buffett joked that the next time he felt like investing in another airline he would call a special “air addiction” line, as reported by Fortune magazine.
However, he started investing again in four airlines in 2016 with renewed faith in the industry, until today, when he acknowledged that he had been “wrong”.
Warren Buffett is considered the most successful investor in the world. So much so that many analysts speak of the “Buffett effect”.
Due to the phenomenal success of their company, many investors seek to copy any trading activity they do.
If Berkshire Hathaway announces that it is going to buy or sell shares, many investors will go out to do exactly the same.
These stocks naturally have a significant impact on the value of stocks that rise or fall according to their popularity with investors.
What did Warren Buffett say?
Buffett told the board, which was held by teleconference: “We made that decision in terms of the airline business. Basically, we take the money out of that industry even holding a substantial loss. “
“We will not finance any company where … Let’s think that he will swallow the money in the future“
The US Transportation Industry it is on the verge of collapse as a result of the coronavirus pandemic, with airlines canceling hundreds of thousands of flights and taking thousands of planes out of service.
Buffett said he had considered investing in other airlines before the pandemic started.
“It is a shock to see, essentially, that your lawsuit dry up,” he said. “That’s basically that we shut down air travel in this country.”
In a statement, Delta said it is aware of the sale of the shares and that it has “tremendous respect for Mr. Buffett and the Berkshire team.”
The airline added that it remains “confident” in its strength.
Serious changes in the industry
However, in Buffett’s words at his shareholders’ meeting, “the airline industry has changed seriously” and pointed to the fact that the four big companies in the sector are each lending an average of up to $ 12 billion.
President Trump’s government and major US airlines They reached an agreement last month for a $ 25 billion bailout to compensate for the sudden loss of income and help pay their staff as the crisis passes.
Although Buffett added that he hopes he is wrong in his analysis, he expressed concern that the airline industry would have the ability to recover to pre-pandemic levels.
BBC economic affairs correspondent Theo Leggett says with traditional dry revenue streams, he finds it difficult to avoid massive layoffs on all airlines.
On the other hand, there are many logistical problems to overcome before somehow restoring commercial flights.
No one is quite sure where the planes can fly or what conditions will be imposed on passengers and staff by each national authority.
There are currently some 17,000 aircraft parked at airports around the world. Still stationary, these ships have to undergo regular maintenance. If those ships were needed, putting them to flight would be a great challenge, says the correspondent.
(Taken from BBC Mundo)
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