NEW YORK • Legendary American investor Warren Buffett has sold his company's entire holdings in the four largest US airlines, warning that the "world has changed" for the aviation industry because of the coronavirus pandemic.
Berkshire Hathaway held sizeable positions in the airlines, including an 11 per cent stake in Delta Air Lines, 10 per cent of American Airlines, 10 per cent of Southwest Airlines and 9 per cent of United Airlines at the end of 2019, its annual report and company filings show.
Airline stocks have been hard hit by the near collapse in US travel demand amid the coronavirus crisis.
Airlines in the United States are cutting hundreds of thousands of flights, parking thousands of planes as travel demand plunges by about 95 per cent and there is no clear timetable for passengers to return to flights at pre-crisis levels.
Mr Buffett said at the company's annual meeting last Saturday that he "made a mistake" investing in the sector, which the pandemic has changed "in a very major way" through no fault of the airlines, leaving limited upside for investors.
"We took money out of the business basically even at a substantial loss," Mr Buffett said. "We will not fund a company that... we think that it is going to chew up money in the future."
Mr Buffett also said Berkshire had invested around US$7 billion or US$8 billion (S$9.9 billion or S$11.3 billion) amassing stakes in the four airlines, starting in 2016.
Southwest, American and United declined comment.
Delta said in a statement it was aware of the sale and has "tremendous respect for Mr Buffett and the Berkshire team". The airline added that it remains "confident the strengths that are core to Delta's business - our people, our brand, our network and our operational reliability - will endure and position Delta to succeed".
Berkshire's meeting began several hours after it reported a record US$49.75 billion first-quarter net loss, reflecting huge unrealised losses on common stock holdings such as Bank of America and Apple during the market meltdown.
While quarterly operating profit rose 6 per cent, several larger businesses including the BNSF railroad posted declines, hurt by the negative impact of Covid-19.
Mr Buffett said operating earnings will, through at least this year, be "considerably less" than they would have been had the pandemic not occurred.
Berkshire's cash stake ended the quarter at a record US$137.3 billion, though Mr Buffett said "we're willing to do something very big", perhaps a US$30 billion to US$50 billion transaction.
But Mr Buffett said he has not provided financial support to companies as he did during the 2008 financial crisis because he saw nothing attractive enough, even after the recent bear market.
The 89-year-old billionaire opened the meeting in Omaha, Nebraska, with close to two hours of remarks to soothe anxious investors, urging them to stay committed to stocks despite this year's bear market, even if the pandemic gets a second wind later this year.
This year's meeting was devoid of the usual three-day weekend of dining, shopping and other celebratory events that annually draw tens of thousands of people to Omaha for what Mr Buffett calls "Woodstock for Capitalists".
Illustrating his remarks with dozens of plain black-and-white slides, Mr Buffett called dealing with the pandemic "quite an experiment" that had an "extraordinarily wide" range of possible economic outcomes.
But he said Americans have persevered and prospered through such crises as the Civil War in the 1860s, the influenza pandemic a century ago and the Great Depression of the 1930s. American "magic" prevailed before and would do again, he said.
"Nothing can stop America when you get right down to it. I will bet on America the rest of my life," he added.