Berkshire Meeting: Buffett on Airlines

From the analyst panel, Gregg Warren of Morningstar asks about Berkshire Hathaway's airline investments. Over the past year, Berkshire has taken stakes in American Airlines, Delta Air Lines, United Continental and Southwest Airlines.

Mr. Buffett says there's no comparison between Berkshire's railroad business and its investment in airlines, shooting down a comparison that some observers have made. At one point, Berkshire bought shares of several railroad companies before buying BNSF outright

Airlines are a "fiercely competitive industry" but even so, it's not as competitive as it used to be, he says.

The industry "has been operating for some time now at 80% or better capacity" measured by seat miles, and he predicts they'll continue operating at above average capacity for the next few years.

"They actually at present are earning quite high returns on invested capital," higher even than FedEx or UPS, he says with a couple caveats. But there could be a price war, which will sap results, he warns.

"It is no cinch that the industry will have more pricing sensibility" than they have in the past, but the conditions have improved, including with its labor relations. All four are buying back stock "at a good clip" and he expects this to continue.

Click here to see the full live coverage of Warren Buffett at Berkshire Hathaway's annual meeting:

http://www.wsj.com/livecoverage/berkshire-hathaway-2017-annual-meeting-analysis

Write to Erik Holm at [e-mail]

(END) Dow Jones Newswires

May 06, 2017 11:51 ET (15:51 GMT)

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