Airline Stocks Tumble as Warren Buffett Exists the Arena

Airline stocks were watching their shares collapse on Monday after Wall Street learned that Warren Buffett’s Berkshire Hathaway had exited all of its airline stock holdings earlier this month.

Buffett revealed the news at Berkshire’s annual shareholders’ meeting over the weekend.

Shares of American Airlines (AAL), Delta (DAL), and United Continental Holdings (UAL) all dropped more than 12% on the news. Southwest Airlines (LUV) fell more than 8%.

“I wouldn’t normally talk about it, but I think it requires an explanation,” Buffett said on Saturday. “We were not disappointed at all in the businesses that were being run and the management, but we did come to a different opinion on it.”

According to Buffett, the COVID-19 pandemic has resulted in airlines being hurt by an exogenous shock “far beyond their control,” Buffett said. The Oracle of Omaha said that if he owned airline stocks now, “it would be a tough decision to decide whether to sustain billions of dollars in operating losses when you don’t know how long it’s going to happen or occur.”

“The world has changed for the airlines, and I don’t know how it’s changed, and I hope it corrects itself in a reasonably prompt way,” he said. “I don’t know whether the Americans will have now changed their habits or will change their habits because of an extended period if it happens that we’re semi shut down in the economy.”

Buffett said the “future is much less clear” to him as to how business will turn out on the other side of the pandemic. He said, the “world changed for airlines and I wish them well.”

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.