Warren Buffett, who once joked that capitalists should have shot down the Wright brothers’ first plane and saved investors money, has made a course correction that’s raised the idea he’s considering the purchase of an airline.
Berkshire has been acquiring shares of Delta Air Lines Inc., the world’s most valuable carrier, and now has airline stakes worth more than US$9 billion. The market values of those companies range from around US$14 billion to US$34 billion, and recent share declines could present some bargains to Buffett.
He once chided airlines for being 'suicidally competitive' on price, and said executives engaged in 'prolonged kamikaze behavior' Berkshire is the biggest holder in Delta, with a stake valued at about UA$3.6 billion. It has amassed a US$2.8 billion investment in Southwest Airlines Co., a US$1.78 billion stake in United Continental Holdings Inc. and American Airlines Group Inc. stock valued at US$1.38 billion.
In more-recent years, Buffett has said that pricing, labour issues and other areas have stabilized as competition dwindled. Buffett’s preferred methods of doing deals could hamper any agreement. He shuns hostile takeovers, meaning the airline would need to be a willing seller. And Buffett tends to keep existing management in place after an acquisition. Such a hands-off method can be troublesome if the target company ends up running into issues, especially if Berkshire lacks a manager who has the airline expertise to step in, according to Cathy Seifert, an analyst at CFRA Research.