The chairman of the investment company Berkshire Hathaway Inc. As well as a well-known stock investor and one of the richest people in the world. Warren Buffett, said that he had sold all shareholdings in a number of US airlines along with the impact of the corona virus (Covid-19) which hit the global aviation sector.
Previous ownership of Buffett shares purchased through Berkshire in this sector reached US $ 4 billion or equivalent to Rp 62 trillion (assuming an exchange rate of Rp 15,500 / US $) in December last year. Including shares in four airlines namely United, American, Southwest, and Delta Airlines.
“The world has changed for the airline business. And I don’t know how that happened. I hope that [the airline business can] recover quickly in a fairly fast way,” he said at the Berkshire annual shareholders’ meeting (AGMS) which was held virtually, Saturday (2/5/2020).
“I do not know whether the US has now changed habits or they will change habits soon because of a long period [due to the Covid-19 pandemic],” he was quoted as saying by CNBC International, Monday (05/04/2020).
“I think there are certain industries, and unfortunately, the aviation industry, among others, is really devastated by events that are far beyond our control,” he added.
The global aviation sector has been stricken since March because almost all airlines have stopped to prevent the corona virus outbreak.
Regional quarantine actions or lockdowns in a number of countries also make people obliged to live and work from home, further depressing airline revenue due to zero revenue.
When asked by Becky Quick, a CNBC reporter to clarify whether Berkshire had indeed sold all share ownership in the airline, Buffett replied “Yes.”
“When we sell something [certain company shares], most likely it means all shares are sold, we don’t cut the position [sell in half or in part]. That’s not our way, if we buy 100% of the business, then we will sell it up to 90% or 80% [majority sold, “he stressed.
“If we like a business, we will buy as many shares as possible and keep them as long as we can,” he added. “And when we change our minds, we don’t sell half measures,” stressed the richest person in the world number 4 version of Forbes. Buffett’s fortune is estimated at Forbes to reach US $ 72 billion this year, or Rp 1,116 trillion.
Buffett stressed that he admires the airline business and their management team, but the emergence of a corona outbreak made the airline’s probability level lower and this necessitated a quick change in investment decisions.
In December 2019, Berkshire owned 42.5 million (10%) American shares, 58.9 million (9.2%) Delta shares, 51.3 million (10.1%) Southwest shares and 21.9 million (7, 6%) United shares. The share prices of the four airlines have dropped 62.9%, 58.7%, 45.8% and 69.7% respectively this year.
“When we buy [airline shares], there is an attractive profit potential for our funds when investing in all airlines,” he said. “It turns out I was wrong about this, because something happened [corona], and not because of the mistakes of the four great CEOs [on the 4 airlines]. Believe me. I don’t think there is currently the joy of being the CEO of an airline.”
Referring to the company’s exposure cited by CNBC, Berkshire posted a record net loss of nearly US $ 50 billion due to the Covid-19 pandem that hit the US stock market. The value of the loss is almost equivalent to Rp775 trillion.
Net loss in the first quarter of 2020 reached US $ 49.75 billion (Rp. 771 trillion), or US $ 30,653 per share (Rp. 475 million) Class A. This reflects US $ 54.52 billion of investment losses, mainly ordinary stock investment .
A year earlier, Berkshire’s net profit recorded on the New York Stock Exchange (NYSE) or Wall Street. Reached US $ 21.66 billion, or US $ 13,209 per share.
Operating profit in this quarter was considered Buffett as actually better performance during the pandemic. Or up 6% to US $ 5.87 billion (Rp. 91 trillion) or US $ 3,624 per Class A share than before at US $ 5, 56 billion or US $ 3,388 per share.