INSUBCONTINENT EXCLUSIVE:
troublesome investment in USAir, Berkshire Hathaway Inc
has amassed stakes that make his holding company among the biggest shareholders in the four largest United States airlines
most valuable carrier, and now has airline stakes worth more than $9 billion
The market values of those companies range from around $14 billion to $34 billion, and recent share declines could present some bargains to
Buffett.
Buffett, 88, hankers for a large deal
And Berkshire is sitting on a cash pile that had grown to about $112 billion at year-end
representatives for American Airlines Group Inc
and United Continental Holdings Inc
Southwest has fallen about 23 percent since its 2018 high of $66.52 a share and Delta is down almost 18 percent from its $61.32 peak last
year.
While Buffett prefers to keep stakes in companies below 10 percent, his Delta holding has crossed that threshold at about 70.9 million
Breaking that barrier reinforces the view that Delta is at least a long-term investment, according to David Sims, president of Sims Capital
Management, which oversees $50 million, including Berkshire Class B shares.
Berkshire is the biggest holder in Delta, with a stake valued at
It has amassed a $2.8 billion investment in Southwest, a $1.78 billion stake in United and American Airlines stock valued at $1.38
more-recent years, Buffett has said that pricing, labor issues and other areas have stabilized as competition dwindled amid a string of
bankruptcies and mergers.
And Berkshire has some familiarity with the airline industry
The $503 billion conglomerate owns NetJets, a fractional aircraft ownership company
see a parallel with its investments in multiple airlines
He shuns hostile takeovers, meaning the airline would need to be a willing seller
And Buffett tends to keep existing management in place after an acquisition
Such a hands-off method can be troublesome if the target company ends up running into issues, especially if Berkshire lacks a manager who
has the airline expertise to step in, according to Cathy Seifert, an analyst at CFRA Research.
Buffett was reminded of the trickiness of a
hands-off approach recently with his stake in Kraft Heinz Co., which he helped form through acquisitions
