Last updated: 03:59 PM ET, Fri August 14 2015

Warren Buffett's Investment Bodes Well For Aviation

Airlines & Airports | Rich Thomaselli | August 14, 2015

Warren Buffett's Investment Bodes Well For Aviation

Photo by Mario Tama/Getty Images

Billionaire Warren Buffett’s Berkshire Hathaway investment firm bought a company this week. Ho-hum. Dog bites man news, right?

Except this was an exceptional acquisition, both in its scope and in nature, and a significant boost and signal in the future of the airline business from an influential investor.

Buffett and Berkshire Hathaway purchased Portland, Ore.-based Precision Castparts, one of the biggest parts suppliers to airplane manufacturers Boeing and Airbus. Buffett, who previously owned a 3 percent share of the company, will pay $37 billion for Precision Castparts, which makes specialized aviation and aerospace parts and has little competition.

Why now? And why from the man who previously eschewed airlines?

Things have changed since Buffett said this at the 2013 Berkshire Hathaway annual meeting, according to The Street: "Investors have poured their money into airlines and airline manufacturers for 100 years with terrible results. It's been a death trap for investors.”

Not anymore.

The demand for air travel is growing, oil prices are still down, airlines are more profitable than at any time in history, and the demand for aircraft is growing from all sectors. Boeing last month released a new forecast that showed the world's airlines will add 38,000 airplanes to the global fleet over the next 20 years – meaning a need for 558,000 new commercial airline pilots and 609,000 new commercial airline maintenance technicians over the next 20 years.

Boeing's 2015 Outlook projects continued increases in pilot demand, up more than 4 percent compared to the 2014 Outlook. For maintenance technicians, demand increased approximately 5 percent.

And that means more parts, and newer parts, and better parts.

"We're going to be in this business for the next 100 years," Buffett told CNBC. "Perhaps a slump in oil and gas has helped us in this case."


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