In aviation, news of the grounding of Boeing's 737 Max 9 aircraft dominated the first few weeks of 2024. According to CNBC, this, coupled with disappointing earnings guidance, helped give the industry a turbulent start to the year.
The pandemic has also been a difficult period for airlines, with many companies having to undergo major restructuring.
Legendary investor Warren Buffett revealed in 2020 that through investment firm Berkshire Hathaway, he had sold the entire airline industry. In all, there was talk of $4 billion worth of shares in United Airlines, American Airlines, Southwest Airlines, and Delta Airlines.
Then he said the pandemic may have fundamentally changed the aviation industry. according to CNBC Are there good reasons why an investor would never invest in aviation again?
The news site writes that Buffett has long argued that airlines suffer from a business model characterized by low margins and high capital intensity as well as risks beyond the companies' control, such as fuel prices and geopolitical uncertainty.
“It's a labor- and capital-intensive trade that's very similar to commodities. It's been a death trap for investors,” Buffett said in 2013.
He also said that being the head of an airline is a hard and stressful job as there are many issues that can arise.
He may be right
When Buffett sold out in 2020, many were disappointed, as many of these stocks have rebounded strongly in recent years and more than doubled from their 2020 lows.
Even former President Donald Trump stated that Buffett was right all his life, but made a mistake when he sold all airline stocks.
CNBC writes that Buffett may have the last laugh, because despite a strong recovery, airlines have not fully recovered from the pandemic.
If you look at the listed US Global Jets ETF, which follows 50 US and international airlines, this is still 40 percent lower than it was before the pandemic in 2019.
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