Warren Buffett made a big mistake selling his stake in airlines.
The same billionaire that has told us to “be fearful when others are greedy and greedy when others are fearful,” sold on fear.
In fact, he argued, “I don’t know whether it’s two or three years from now that as many people will fly as many passenger miles as they did last year. The future is much less clear to me about how the business will turn out through absolutely no fault of the airlines themselves.”
While the billionaire isn’t exactly hurting for cash, he did sell stakes in great investments.
Even Southwest Airlines CEO Gary Kelly said Buffett was being far too pessimistic.
“It’s a pessimistic one. I am far more optimistic,” Kelly said in regards to Buffett’s reasoning. In addition, the CEO said he doesn’t believe the industry will see a sustained downturn in air travel. “I believe this too shall pass. You go back to the Spanish Flu in 1918, it was followed by the roaring 20’s. Life will get back to normal. It is a question of how long that is going to take.”
Better, airlines are beginning to see flickers of hope.
In fact, the Transportation Security Administration (TSA) data shows that travel demand is only rising. For the week ended May 30, the number of travelers returned to 293,144 – the highest number since May 15. “We expect trends to continue to improve as states ease stay at home restrictions and leisure activities resume,” wrote Cowen analyst Helane Becker in a note to clients. “Airlines with whom we’ve spoken have seen modest green shoots with improvement coming in beach and mountain destinations.”
- American Airlines (AAL) has exploded from $8.25 to $11.85 and rising.
- Delta Air Lines (DAL) ran from $17.51 to $28.50.
- JetBlue (JBLU) ran from $7.34 to $11.30.
- United Airlines (UAL) ran from $18.18 to $33.65
- Southwest Airlines (LUV) rocketed from $22.46 to $36.40
The bottom may be in for airlines. I’m just shocked Warren Buffett sold on fear.