US airline stocks buffeted by Warren’s surprise sell-off
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US airline stocks have dropped sharply today as markets reacted to veteran trader Warren Buffett’s decision to sell all of his firm’s stakes in the US’ four main carriers.
At the end of last year, Berkshire Hathaway held considerable positions in the four, including 11 per cent of Delta, 10 per cent of American Airlines, 10 per cent of Southwest Airlines and 9 per cent of United Airlines.
However, yesterday’s announcement of the divestment prompted shares in the four to plunge as traders followed the Sage of Omaha’s lead.
Delta fell 9.7 per cent, American 9.9 per cent, Southwest 8.2 per cent and United 9.7 per cent as the Dow Jones and S&P500 dropped.
Planemaker Boeing also suffered, shedding 5.9 per cent, as the much buffeted aviation industry took yet another beating on trading floors.
Explaining the decision at Berkshire Hathaway’s AGM yesterday, which was held digitally, Buffett said that “the world had changed” for the sector.
“We were not disappointed at all in the businesses that were being run and the management, but we did come to a different opinion on it”, he added.
“We will not fund a company [which] we think that it is going to chew up money in the future.”
Across the world planes have been grounded and services suspended due to coronavirus, which has led to stringent travel bans and border closures.
Global industry body the International Air Transport Association has said that the crisis could cost the sector up to $314bn.
US airlines have already received $25bn from the federal government to help them through the crisis and are in negotiations over further funding.
The falls dragged US markets down on another dire day for the world’s largest economy, with factory orders falling 10.3 per cent in March, the biggest fall on record.