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Buffett Discusses Pandemic, Airlines at Annual Meeting 

Warren Buffett Talks About the Pandemic and Why He Changed His Mind

About Airline Investments at the Berkshire Hathaway Annual Meeting

Warren Buffett’s much-anticipated remarks were uncharacteristically sober and reserved at the Berkshire Hathaway annual meeting May 2.   For the first time, the meeting was held remotely, due to the pandemic.  The headline item in his remarks was his recent decision to sell his entire stake in the country’s four major airlines – American Airlines, Delta Air Lines, Southwest Airlines and United Airlines – at a big loss.


“I just decided that I’d made a mistake,” he said.


“The airline business – and I may be wrong and I hope I’m wrong – I think it has changed in a very major way.”


For someone known for his folksy, optimistic comments at his annual “Woodstock for Capitalists,” Buffett was noticeably more cautious and circumspect about the challenges ahead at this year’s annual meeting.  Uncharacteristic for him, he repeatedly said “I don’t know.”


Buffett’s rationale for selling a very large position in the four airlines seemed to be about much more than just the finances of the airline industry.  “I don’t know whether two or three years from now that as many people will fly as many passenger miles as they did last year,” he said.  “They may or they may not, but the future is much less clear to me.”


His comments about the larger economy were just as uncertain.  The range of possibilities on the economic side are “extraordinarily wide,” he said.


The airline industry is far from the only industry worrying Buffett.  He also pointed to problems in real estate, energy and retail that could ripple through the economy and into the banking sector.  He is clearly concerned that the economy could get worse.  He also said that the $137 billion war chest Berkshire Hathaway has on hand “isn’t all that huge when you think about worst-case possibilities.”


I highlight Buffett’s change of mind about his airline investments because it illustrates so vividly the fundamental rethinking about the duration, impact and implications of the pandemic that is going on in business suites around the world.  There are so many variables and uncertainties that even the very best investors, like Buffett, find the current moment highly challenging.  How long will the pandemic last?  Will there be a second wave of infections?  How will the pandemic affect consumer spending and business investment?  When will travelers feel comfortable again about getting back on airplanes?  How long will it take to develop a vaccine?  What will the policy response and the longer-term implications be?  With a rare, exogenous event, like a pandemic, there are many complex, interrelated and unpredictable issues that will impact the length of the shutdowns and the course of the post-pandemic economic recovery.  Policymakers and business leaders should take note.


Full disclosure: I am a shareholder of Berkshire Hathaway.

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