Buffetted – Aviation Gets a Warren

It’s well known in the capitalist investment world.  Warren Buffett has his doubts about both the digital economy and aviation.

Both of these Buffettisms are now under scrutiny.  First the Warren announced last year that digital was now investment material (at least by Berkshire Hathaway),  now he’s buying aviation stocks.   That’s a 180˚ move away from his previous strategy and its significant for all those who watch the industry.  Berkshire Hathaway has now picked up shares of  four US airlines,  American Airlines, Delta Air Lines, Southwest Airlines and United.  Not billions.  Just hundreds of millions.  You know Warren,  starts small on a new idea then basically buys up the entire industry when he senses victory.

What’s really interesting is not that he’s changed his mind,  its why.   Buffett wasn’t always an aviation averse investor.  That was until he got burned in 2001 when he lost money in the US Airways Group and said, famously, “”Now if I get the urge to invest in airlines, I call an 800 number, and I say: ‘Hello, my name is Warren, and I’m an air-o-holic'”.

Titters followed.  Airlines watched fuel prices skyrocket,  costs rise,  bureaucrats fiddle and general world economy blues put paid to the old adage that investing in airlines was a Big Underpants Investment Strategy.  Buffett was right.  Austrian Airlines, Swiss Air, etc etc.  Lists of national carriers that were swamped by faster moving low cost operations and stymied by poor management and desperate planning.

Things have changed and that’s the why part.  Let’s just step back and think about numbers.  Here’s one.  Global passenger numbers will almost double to 7.2 billion by the end of 2035, from 3.8 billion at the moment according to the International Air Transport Association (IATA) and led by the Asian-Pacific market.

Here are a few more numbers.

airlinegrowth
Passenger growth in China from 817m now to 1.3bn, USA up to 1,1bn from 482m & India up to 442m from 110m by 2035

Gadzooks!

Tally ho!

Tora tora tora!

It’s time to get investing in the aviation business.  In Africa there’ve been many false starts but the cost of flying has come down and the opportunity for aviation startups has grown.   There are a few storm clouds out there, however.  African government’s have long used aviation as a kind of golden egg laying tax creator.  This  is changing,  but not quickly.  The idea that all the people flying are rich and deserve to pay more is pervasive but utterly erroneous.  I flew to the Seychelles a while back and was surrounded by Indian fishermen who’d never flown before and were being shuttled to their ships waiting on the island of Mahe.   This was not tourists with flabby bellies jetting off to whoop it up while the poor scrabble about on their dows.  This was capitalism in motion,  fishermen heading off to their next shift on board a commercial airliner.

There are many other points to make about this.  But that’s for another time.  At the moment,  just savour the delight of the Buffett

 

 

 

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