Here's How Much Warren Buffett Has Lost on American Airlines
Warren Buffett for years advised against buying airline stocks, warning the industry had an "insatiable" demand for capital that required investors to pour money "into a bottomless pit." But all of that changed in the second half of 2016, when Buffett's Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) began buying a basket of U.S. airline stocks including shares of American Airlines (NASDAQ: AAL).
Buffett explained his change of heart to CNBC in February 2017. Airlines indeed had had "a bad first century," he said, comparing the industry to the until-recently feckless Chicago Cubs baseball team. But he said that while it remains "a very tough business" due to the high fixed cost of buying airplanes, he believes a round of bankruptcies and consolidation has created an industry that can better match up supply with demand and generate sustained profitability.
Image source: American Airlines.
Source Fool.com
