Earlier this year, there were rumors that Berkshire Hathaway (BRK-B) might acquire Southwest Airlines (LUV). Berkshire Hathaway holds more than $100 billion in cash. Chairman Warren Buffett is looking at a major acquisition to deploy the cash. At one point, Buffett was bearish on the airline industry. Buffet has gradually built positions in leading airlines. Along with Southwest Airlines, Berkshire Hathaway holds a stake in Delta Air Lines (DAL), American Airlines (AAL), and United Continental Holdings (UAL).
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In 2013, Buffett called the airline sector a “death trap.” Buffett said, “If a capitalist had been present at Kitty Hawk back in the early 1900s he should’ve shot Orville Wright; he would have saved his progeny money.”
There were rumors in the first quarter that Berkshire Hathaway might acquire Southwest Airlines. The company sold some Southwest Airlines shares in the first quarter. Berkshire Hathaway also trimmed its position in Southwest Airlines in the fourth quarter. While Berkshire Hathaway trimmed its stake in Southwest Airlines, it added more Delta Air Line shares in the first quarter. The company also added Delta Air Line shares in the fourth quarter. Berkshire Hathaway is Delta Air Line’s biggest shareholder.
Looking at airline stocks’ year-to-date price action, American Airlines is trading flat for the year, while United Continental Holdings has lost 1.7%. Southwest Airlines and Delta Air Lines have seen upwards price action of 11.1% and 12.2%, respectively.