Airlines: Remember when...

There was the typical respsonse, so predictable it just made me sigh, when Berkshire bailed on the airline stocks. To me is was one very wise move yet again by Buffett given a reasonable projection of risk.

So the stocks went up…but did the businesses really prosper? That question seems to be yet again under “conversation” as the stocks of such are cleaning out the side ditches. Remember people there’s more than a few quarters of eps growth that determine the value of a business.

Valuing a business is quite complex in most, but not all, cases. Google? Not so much. US Air? Oh hell yea, that my friends gets into the down and dirty shag capet. You don’t really know what’s down there till the tide sloshes around some.

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There was the typical respsonse, so predictable it just made me sigh, when Berkshire bailed on the airline stocks.

To me the problem wasn’t Buffett bailing on airline stocks, it is him buying them in the first place. esp. after all that he said about them earlier.

All that talk about airlines being an oligopoly in their hubs and having increased pricing power. They always find a way to mess up. Now they don’t have enough pilots to fly planes, even as seat demand his high.

If Buffett was so enamored of airline transportation, he should have bought UPS.

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What rnam said.

There was the typical respsonse, so predictable it just made me sigh, when Berkshire bailed on the airline stocks. To me is was one very wise move yet again by Buffett given a reasonable projection of risk.

So the stocks went up…but did the businesses really prosper? That question seems to be yet again under “conversation” as the stocks of such are cleaning out the side ditches. Remember people there’s more than a few quarters of eps growth that determine the value of a business.

Valuing a business is quite complex in most, but not all, cases. Google? Not so much. US Air? Oh hell yea, that my friends gets into the down and dirty shag capet. You don’t really know what’s down there till the tide sloshes around some.

That’s one the more revolting mixed metaphors I’ve heard in awhile: dirty shag carpet and seawater definitely should never be put together.

But yeah, what a difference a year makes, eh? A year ago, Buffett was the loser who bailed on the airlines at the nadir, in an industry that was quickly rebounding. Now, with these companies unprofitable again, despite the recovery, because of high fuel prices, labour shortages and higher labour costs, and on the cusp of what looks like will probably be a recession, and heavy debt levels with little or no cash flow to pay the interest, it is very hard to see why anyone would want to own these companies, even at current prices which are probably close to where Buffett bailed.

I very much prefer Berkshire’s recent big acquisitions, selling fuel to the airlines, to the fuel buying ones we had 2 years ago. Maybe Buffett will wait another year or 2 and give one of them a $10b lifeline with 10% interest and conversion privileges. And we the backseat drivers who didn’t like the direction he took 2 years ago will probably enjoy the ride a lot more than if he had listened to our squawking.

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