US: Warren Buffett invests $1.2b in US airlines

Warren Buffett used to call the airline industry “a death trap for investors”, but the world’s most famous stockpicker has spent more than $1.2b building stakes in four US airlines, he said Monday. Disclosure of the investments by Buffett’s holding company, Berkshire Hathaway, caused shares in the four companies — United Continental, American Airlines, Delta and Southwest — to rise sharply in after-hours trading. The news raised Buffett-watchers’ eyebrows, too. Buffett has not only eschewed airline stocks for years; he has actively disparaged an industry where intense competition, high labour costs and volatile fuel prices have caused repeated rounds of bankruptcies. According to a regulatory filing, Berkshire had amassed a $797m stake in American Airlines as of September 30, along with $238m in United Continental and $249m in Delta. The Southwest stake was purchased after the end of Q3 and was not included in the filing. Buffett revealed the existence of the Southwest stake in an interview with CNBC following publication of the filing. “I’d feel terrible if the story the next day was why wasn’t Southwest included,” he said. He declined to discuss the investment thesis behind the stakebuilding by Berkshire, where he now shares investment responsibilities with two other fund managers, Todd Combs and Ted Weschler. At Berkshire’s annual meeting in 2013 Mr Buffett told attendees that the airline industry was a “death trap”, saying: “Investors have poured their money into airlines for 100 years with terrible results.” Buffett had sworn off airline stocks since suffering heartburn on an investment he made in US Airways in 1989.<br/>