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Warren Buffett wrong to sell airline shares, says Trump

written by Dylan Nicholson | June 9, 2020

A 2016 file image of American Airlines Boeing 787-8 N814AA at London Heathrow. (Wikimedia Commons/John Taggart)
A 2016 file image of American Airlines Boeing 787-8 N814AA at London Heathrow. (Wikimedia Commons/John Taggart)

US President Donald Trump has criticised Warren Buffett’s decision to sell  $6.1 billion of shares in the four largest US airlines in May.

President Trump highlighted figures showing shares in America’s big four airlines are up amid claims recovery is on the way.

Airlines faced a heavy blow when Buffett pulled his investments from the industry as well has his confidence. Buffett previously held between 8 per cent to 11 per cent of shares in the big four; American Airlines, Delta Air Lines, United and Southwest.

Buffett claimed that airlines would be stuck with planes in the short term, which won’t be needed due to a lack of demand. He also said that as airlines in the US will have to pay back part of the loans given to them by the government under the CARES Act, that airlines were not a good investment for the foreseeable future.

At a White House press conference, President Trump confirmed that Buffett “should have kept the airline stocks because the airline stocks went through the roof today”. At the time of the press conference on Friday, shares at American, Delta, Southwest, and United were up 18 per cent, 9 per cent, 5 per cent, and 13 per cent, respectively.

However, this data may be not as clear as President Trump may want to claim. Much of the gains made across shares on Friday came across a vast array of industries not just the airline industry, after Bureau of Labor Statistics data showed that the US unemployment rate was not as bad as experts had predicted. Airline shares are still down compared with the same time last year.

The US government and President Trump now has a vested interest in the success of airlines as well as investor confidence in them. Part of the CARES Act means that airlines handed over warrants. The US government can turn these into shares in the future.


This means that the US government could own between 1-3 per cent of each of the big four. Some airlines reissued shares to raise capital.


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