NEW YORK • Billionaire investor Warren Buffett has taken stakes in three large airlines in the US, in a US$1.3 billion (S$1.8 billion) bet that marks a sharp U-turn of his antagonistic views of the sector.
Mr Buffett's Berkshire Hathaway invested US$797 million in American Airlines, US$249 million in Delta Air Lines and US$237 million in United Continental Holdings, a regulatory filing reviewed Monday by Agence France-Presse showed.
A stake was also purchased in Southwest Airlines after the end of the third quarter but was not included in the filing. Mr Buffett revealed the existence of the Southwest stake in an interview with CNBC following publication of the filing. "I'd feel terrible if the story the next day was, why wasn't Southwest included," he said.
The financial guru was known for his dislike of the airline industry after his disastrous bet on preferred shares of US Airways in 1989, calling the sector a "death trap". He actively disparaged the industry, where intense competition, high labour costs and volatile fuel prices led to repeated rounds of bankruptcies.
The surprise Berkshire news pushed airline shares sharply higher in after-market trades. American Airlines jumped 3.5 per cent, Delta was up 2.9 per cent and United Continental, the parent of United Airlines, gained 2.6 per cent.
Mr Buffett declined to discuss the investment thesis behind the stake-building by Berkshire, the Financial Times reported.
Analyst George Hamlin, of Hamlin Transportation Consulting, said that investing in all four airline stocks is an unusual move.
"Over the past six or eight years, US airlines have focused far more on return on investment and far less on market share than ever before," he said, according to FT.com. "What Buffett is basically saying is that the US industry has reached a position of relative stability and will behave."
Mr Buffett now shares investment responsibilities in Berkshire with two other fund managers, Mr Todd Combs and Mr Ted Weschler. Both of them have already widened Berkshire's range of investments once this year; one of them was responsible for buying a US$1 billion stake in Apple in March, after years of their boss shunning tech stocks.
Investors are favouring United States airline stocks in the last few weeks after several carriers indicated that weakness in fares, which hit profits, would be eased soon.
US airlines have also exercised restraint in adding capacity and launching price wars since emerging from the Great Recession and, together with the effects of lower fuel costs, they managed to achieve record profits last year.