Warren Buffett being acknowledged as the most intelligent investor of all time made a decision to sell Berkshires Hathaway stocks in America’s biggest Airline companies which were American Airway, Delta Airline, South west Airline and United Airline. The reason for this is simple, he doesn’t believe that planes will be flying long miles like previously. He believes that things will change for airline companies.
It is true that the Covid-19 pandemic affected a lot of things and change the lifestyle of a lot of people, also it has affected businesses but one of the businesses that got affected is the Airline industry. Being the highest and most respected investor, Warren Buffett’s decision cut the attention of a lot of people. Even though Berkshires Hathaway lost over $50 Billion in April which is normal following the pandemic and recession which affected the stock market.
First is that, Warren Buffett has a rule that says if a business is doing well, the stocks will follow but with that of the airline industry, the reverse is the case. There is no proof that the airline industry will function properly for the next 1 year even if they get a bailout. The airline industry has a problem related to passenger and miles. If the number of passengers in a plane do not make up 71% of the plane seat, then the airline isn’t making profit.
Warren Buffett do not like investing in companies that owe too many debt and it is no doubt that these companies owe a lot of debts are still interested in the United States bailout debt. It is not a bad idea for Warren Buffett to sell his stocks in the company following the fact that he does not like companies with debt.
Will the companies be able to recover very soon? Unlike food, and other basic things, airline companies might find it a little difficult to recover and start making profit. Will these companies be able to recover soon is one thing that Buffett considered before selling the stocks.
Truthfully, Buffett accepts all responsibility for the wrong investment decision but also, a lot of people believe that he is right and he has seen some future that can be predicted not to be good for the airline industry. What do you think about the airline industry and investing in them at this point? Do you think airline companies will have full planes since airlines just started functioning?