Warren Buffett's recent investment in more than 30 million shares of airline stocks have some analysts hinting at a potential takeover by the Berkshire Hathaway CEO.
"We view a full-scale acquisition of an airline by Berkshire as a possibility and not worth dismissing, particularly if the stocks weaken," a group of Morgan Stanley analysts led by Rajeev Lalwani said in a note to clients Wednesday via Bloomberg.
Late last year Buffett's multinational conglomerate became one of the top two investors in Delta Air Lines Inc., United Continental Holdings Inc., American Airlines Group Inc. and Southwest Airlines Co.
Last year Berkshire also acquired airplane part manufacturer Precision Castparts.
Buffett's investment comes at a time when the airline industry is profiting on a consistent basis. According to the Department of Transportation, airlines brought in $25.6 billion in profits last year, which marked the fifth consecutive year the industry saw profits.
According to Bloomberg, Lalwani wrote in the note to clients that "while we have no knowledge of any potential transactions, U.S. airlines have structurally changed for the better following consolidation that has resulted in more pricing power, supply discipline, and a focus on margins over market share."
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"An interest in industries with structural improvement and the gradually growing stakes are fairly consistent with Berkshire's approach to acquiring Burlington Northern Santa Fe," he added, referring to the North American freight railroad network Berkshire acquired in 2010.
Another financial services company, Cowen & Co told investors to keep an eye out for a potential acquisition or leveraged buyout involving Buffett.
"This year, we believe a surprise may be that a major airline gets acquired, potentially by Berkshire, or goes private on its own," Cowen's Helane Becker said in a note via Bloomberg.
At a recent event in Los Angeles, Berkshire's vice chairman Charlie Munger drew a comparison between the airline industry and railroad industry, pointing out that they both became better businesses when competition was significantly reduced.
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