It takes a great deal of courage and the mentality of the sky being the only limit when it comes to the airline industry. Warren Buffett knows the risk of airlines after he dabbled with an investment in the late 80’s on US Airways with $358 million. He now owns shares in 4 major American Airlines: American, United, Southwest, and Delta!
In 2013 Mr. Buffett referred to the American Airline industry as a black hole for investors. Statistics show 183 airlines have gone bankrupt since 1978. Airlines are known to have large margins which are dangerous for investors and there money! After the original investment for US Airways, he attempted to sell for .50 cents on the dollar, but times were rough. Once the company and economy got a little better he was eventually able to finally sell, essentially he broke even!
Mr. Buffett feels that in order to level the playing field of risk for his new investments, owning stocks for 4 airlines is a key solution. When one fails he can rely on the other 3 to make up the financial slack! All of Mr. Buffett’s airlines total in around $10 billion Net worth. His lineup in recent share pricing: American at $41.73, United at $67.93, Southwest at $52.61, and to round out the roster Delta at $46.00. Under Mr. Buffett’s leadership with Berkshire in 2008 Delta merged with Northwest, in 2014 Southwest merged with AirTran, and in 2015 American merged with US Airways.
All in all, these airlines happen to be the four largest in the world with a promising future. American, Delta, and United — are key examples of which companies fit Mr. Buffett’s guidelines for a good investment. “In the business world, the rear-view mirror is always clearer than the windshield!” – Warren Buffett