Warren Buffett offloads US airline stocks: Time to sell Indigo & Spicejet?

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26 Aug, 2025 12:21

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When Berkshire Hathaway Inc. sold its entire stake in the four largest US airlines in April, it dropped a hint to investors in other parts that the investment climate for the airline stocks might have change amid COVID-19 outbreak.

Chairman Warren Buffett said on Saturday at the company’s annual meeting that the “the world has changed” for the aviation industry. The conglomerate had held sizeable positions in the airlines, including an 11 percent stake in Delta Air Lines, 10 percent of American Airlines Co., 10 percent of Southwest Airlines Co., and 9 percent of United Airlines at the end of 2019, according to its annual report and company filings, Reuters reported.

Buffett said he “made a mistake” investing in the sector, which the pandemic has changed “in a very major way” with no fault of the airlines, leaving limited upside for investors, a Reuters report quoted.

The 89-year-old Buffett, popularly known as ‘Oracle of Omaha’ is followed by investors across the globe including India. A complete selloff could also turn investors back in India slightly cautious about the airline sector, suggest experts.

Companies would avoid official travel and would rather prefer conducting meetings over video conference. People, at large, will also avoid leisure travel (to the extent possible) at least for the next 6 to 12 months, suggest experts.

“I, therefore, agree with the views of ‘Oracle of Omaha’ that the airlines industry might not be a very lucrative sector in the short term. In India as well, the airline sector’s recovery will depend on a stimulus from the government as the margins in the sector are paper-thin,” Gaurav Garg, Head of Research, CapitalVia Global Research Limited-Investment Advisor told Moneycontrol.

“Warren Buffet has previously said that during the times when dark clouds fill the economic skies and rain gold, one should come out with buckets and not tablespoons, I would suggest to continue following the same in these times too,” he said.

Two of the listed companies have also taken a beating – InterGlobe Aviation has plunged a little over 25 percent so far in 2020 while SpiceJet is down by a little over 60 percent in the same period.

As airlines and airports prepare to resume operations, once the lockdown is lifted and the government gives the green signal – experts feel that it would not be the same. There is a likelihood of prices moving higher, and demand for travel is expected to remain low amid COVID-19 fears.

Given that the majority of the airlines companies are burdened with considerable debt in the balance sheet coupled with higher fixed cost in form of rental and other operating costs, the current pandemic is expected to pose further challenges for the aviation companies for an extended period, suggest experts.

Experts advise investors to bring down their exposure to the airline. If they are long term investor then they could hold the stock, they say.

“The travel restrictions across the world have put many related industries into a severe economic crisis which also includes the airlines business that has remained shut in India since late March. And the decision to divest the entire stake in US airlines stock by legendary investors (Warren Buffett) will certainly have a negative feedback loop for the aviation industry as a whole,” Dinesh Rohira is a Founder & CEO of 5nance.com told Moneycontrol.

“With the mounting challenges ahead with subdued demand, short term investors should ideally exit or reduce to extreme levels from airline stocks to be invested in defensive play,” he said.

Rohira further added that nevertheless, the lower commodity price coupled with the re-opening of the economy should help revive the businesses in the next 1-2 years from now, and therefore, investors with longer duration can still allocate capital to relatively quality stocks.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.