/IndiGo, SpiceJet tank after Warren Buffett dumps his airline stocks

IndiGo, SpiceJet tank after Warren Buffett dumps his airline stocks

Shares of Indian airliners tanked in Monday’s trade after the legendary investor Warren Buffett said he has dumped his entire stake in US airline companies, sending shockwaves to the industry across the world.

Shares of Interglobe Aviation slumped 6.19 per cent to Rs 933 while its rival SpiceJet tanked 4.91 per cent to Rs 42.65. The defunct Jet Airways fell 4.84 per cent to Rs 18.50.

Buffett, during his annual address to shareholders, said thanks to the pandemic the “world has changed” for the aviation industry without any fault of theirs. He added that he has been advised not to fly.

“The airline business, and I may be wrong, and I hope I’m wrong, changed in a major way. We like those airlines but the world has changed… and I don’t know how it’s changed,” he said.

Berkshire Hathaway had held sizable positions in the major US airlines, including an 11 per cent stake in Delta Air Lines, 10 per cent of American Airlines, 10 per cent of Southwest Airlines and 9 per cent of United Airlines at the end of 2019, according to its annual report and company filings.

The investment firm, however, still owns all of Precision Castparts Corp., a supplier of aerospace parts that’s bracing for lean times as Boeing Co. and Airbus SE cut jetliner production. Berkshire bought Precision Castparts in 2016 in a transaction valued at $ 37.2 billion, making it one of Buffett’s biggest deals.

With thousands of planes parked on tarmac across the world and no clear timetable for the resumption of air travel, the aviation industry is looking at a bleak future. A number of bankruptcy operations have already been filed with many more predicted to go under administration.

“By the end of May-2020, most airlines in the world will be bankrupt,” Centre for Asia Pacific Aviation (CAPA) had predicted in mid-March.

Meanwhile, if an imminent Supreme Court ruling on passenger refunds goes against the airlines it could trigger the need to fund $ 300 million of domestic refunds, which will be challenging for airlines, CAPA India said.

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