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Warren Buffett Says Airlines Have 'Changed in a Very Major Way' as Billionaire Dumps Entire Stake in Four Carriers

Billionaire investor Warren Buffett said he didn't "particularly enjoy" investing in airlines at a time when "people have been told basically not to fly."

U.S. airline stocks slumped lower Monday after billionaire investor Warren Buffett told investors over the weekend that he's dumped all his holdings in the sector in the wake of the coronavirus pandemic.

Buffett said the nearly $8 billion he'd invested in the country's four largest airline stocks had been a "mistake", telling investors at the annual general meeting of his Berkshire Hathaway undefined investment group that that airline business has "changed in a very major way" that will leave carriers more indebted and with fewer commercial passengers and "too many planes".

"We felt our share of the underlying earnings was a billion dollars and we felt that that number was more likely to go up than down over a period of time," Buffett said. "And it turned out I was wrong about that business because of something that was not in any way the fault of four excellent CEOs."

"We made that decision (to exit) in terms of the airline business," he later said. "We took money out of the business basically even at a substantial loss, and we will not fund a company that where we think that it’s going to chew up money in the future."

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Delta Air Lines DAL, one of the four carriers Buffett exited last month, was marked 8.7 lower in early trading Monday to change hands at $21.94 each. It's main domestic rivals, American Airlines AAL and United Airlines UAL, were marked 8.8% and 7.2% lower respectively, while U.S.-focused Southwest Airline LUV was seen 6.3% lower at $27.38 each.

Last week, the International Air Transport Association lobby group, known as IATA, said global airline passenger volumes for the month of March fell to the lowest levels since 2006, with revenues down 52.9% from the same period last year. 

Cargo traffic was down 15% from the prior year, IATA noted, and is likely to fall between 14% and 31% for the whole of 2020, 

IATA also warned that, even as countries around the world lift travel restrictions as coronavirus case numbers subside, demand is likely to remain subdued for several months and the industry faces a $314 billion hit to revenues that could cost some 25 million industry-related jobs.

U.S. airlines, after taking $25 billion in industry aid from the CARES Act last month, are forbidden to cut staff until October 1, although some 37,000 workers at Delta have volunteered to take unpaid leave, while United has reduced working hours for around a quarter of its 15,000 workforce.