Having previously and openly avoided in investing in the volatile sector, Warren Buffet and Berkshire Hathaway have chosen to invest heavily in a number of airlines, including United Continental Holdings, American Airlines Group Inc. and Delta Air Lines. The investments were disclosed in filings with the Securities and Exchange Commission.
The investments included the purchase of 21.8 million shares in American, 6.3 million shares in Delta, and 4.5 million shares in United, listed as effective September 30.
The timing of the investment coincided with an announcement on the same day from Moody’s Investor Service indicated it was lowering its outlook on the global airline industry from “positive” to “stable”, believing that the sector’s operating margins and operating profits are likely to decline within the next 12-18 months as capacity continues to exceed demand.
The ratings service has said that: “For U.S. airlines, a combination of slightly higher fuel costs and higher labor costs at American Airlines, Delta Air Lines, Southwest Airlines and United Continental Holdings will contribute to a 20 percent contraction in operating profits over Moody’s outlook horizon.”
Berkshire Hathaway Inc., which is based in Omaha, Nebraska, already owns NetJets, which partial ownership interests in business jets, and also owns more than 90 subsidiaries, such as clothing, furniture and jewelry firms, as well as holding major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.
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