Warren Buffett’s 10 Billion Dollar Airline Investment Speaks Volume about the Industry

Berkshire Hathaway of Warren Buffett will be investing a few billion dollars in the airline industry of the US.

Buffett has made investment in Delta, American, United, and Southwest Airlines, which has totaled to an amount worth 10 billion dollars.

In the year 2013, Buffet had referred to the airline industry as the investor deathtrap; however, these investments indicate that Buffet has undergone a big change of heart. The investment of Buffet has been consistent at 2.1 billion dollars in American, 2.2 billion dollars in United, 2.4 billion dollars in Southwest, and 3 billion dollars in Delta.

For the past many years, the infrastructure of the airline industry has been transforming. Delta, American, United, and Southwest Airlines have made profits and overcome challenges pertaining to the costs of labor, financial crisis and requirement of cheap oil. With the rapid strides they are making, there are very few rivals and competitors left in the domestic market.

These four airlines have been updating their methodologies from time to time. In the year 2015, Delta transformed its program on frequent flyers to a revenue-based system instead of based on the mileage. This meant that the passengers were awarded the sum of money they spent rather than the number of miles they were flying.

Seeing the success of this program, American and United incorporated the same strategy in their own systems respectively. A similar approach was seen when the fees for baggage and the fare for basic economy class was implemented.

This has resulted in the same kind of experience for customers, amenities and quality service in all the main four airlines.

If we look at the foundation of any market, it is driven by similarity. The airline industry is an intensive capital operating business that involves greatly the fluctuations of currency, business cycles, geopolitics, and the global economy environment.

However, the Southwest Airline has a little different approach. Out of the four airlines, it is the only airline that has an aircraft of a single type. The aircraft is Boeing-737, which is a business model that is cost efficient. It also differs from other airlines in terms of cabins in the business class, fees for checked baggage, and travelling on routes that are trans-oceanic.

Despite the fact that these airlines are the most profitable in the industry, they also had faced financial crisis at some point. The recent initiative and investments have consolidated these airlines for a longer term. These airlines are generating phenomenal performances in finances and are also leading the industry in terms of excellence in operation.

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