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Did investment guru Warren Buffett just give the U.S. airline industry a boost?
The Berkshire Hathaway CEO, a longtime critic of airline stocks, is now the proud owner of more than 30 million shares divided among the Big Three U.S. airlines.
That shocker was revealed this week in a regulatory filing with the Securities and Exchange Commission, a signal to other investors that Buffett believes the airline industry is poised to continue its torrid growth, which included a collective $25.6 billion in profits last year, according to the Department of Transportation.
Why is it a shocker? Buffett was burned more than 25 years ago by an investment in what was then US Airways Group and he vowed never to buy airline stock again, famously saying in 2002, ”If a capitalist had been present at Kitty Hawk back in the early 1900s, he should have shot Orville Wright.”
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Berkshire Hathaway purchased 21,770,555 shares of American Airlines Group, whose shares have gained 2.48 percent this year; 6,333,923 shares of Delta Air Lines Inc., although its shares have dropped more than six percent this year; and 4,533,013 shares of United Continental Holdings Inc., whose stock is up 9.8 percent in 2016.
By sheer dollars and cents, Buffett just spent more than $1.2 billion on airline stocks — $797 million on American, $249 million on Delta and $237 million on United.
CNBC also reported that Buffett took a small stake in Southwest Airlines back in September.
What does it all mean to the average flier? That the airlines’ plans are working. Investment and growth are always good, and news like the Buffett stock purchases are validation for carriers to continue their innovative — if not always public-pleasing — ways of dividing up its fares into more and more pieces ranging from no-frills to first class and beyond.
Whether that continues to pay off remains to be seen.
Especially by Buffett.