Warren Buffett dumped airline stocks to save them from a disaster

Warren Buffett took massive losses on Berkshire Hathaway's holdings in U.S. airlines early in the COVID-19 pandemic so that Delta Airlines (DAL), United Airlines (UAL), American Airlines (AAL) and Southwest Airlines (LUV) could benefit from government aid without the cloud of a billionaire investor such as Buffett himself benefitting from behind the scenes.

Berkshire CEO Buffett famously loaded up on the stock of the four biggest U.S. airline carriers in 2016 — and then unceremoniously announced in May 2020 that he'd closed out the positions at significant losses. (The airline stocks would all eventually trough on May 25.) But it wasn't until the 2021 Berkshire Hathaway Annual Shareholders meeting that investors discovered the reason.

"[The airlines] might very well have had a very, very, very different result if they had had a very, very, very, rich shareholder that owned 8% or 9%. They didn't have that. You might not have gotten the same result. In fact, you probably wouldn't. I can see the headlines because you've seen the headlines on some companies that took $100 million. The airline didn't need it. Some of them gave it back. Most of them gave it back. But you're actually looking at a different result than if we had kept our stock," said Buffett at the event which is being exclusively live-streamed by Yahoo Finance.

Buffett explained that Berkshire only approached the decision-making process after it was assured through the Coronavirus Aid, Relief, and Economic Security (CARES) Act that there would be a robust backstop in the markets — until both monetary and fiscal policy kicked in.

"[W]e had an incredible problem. Just as Charlie is the chief culture officer, I'm chief rick officer at Berkshire. That's my job. We hope we do well, but we want to be sure we don't do terribly ... We had a few people ... that wanted to go in for help from the government. They said, 'Everybody's going in for them. Why don't we go in?' I said, 'Berkshire can handle it. This is for people that can't handle it, so we're not applying for it'" Buffett said.

Buffett agrees with the government aid in general, but wishes it had been more expansive. "I think that was fine public policy. I wish it could go to every restaurant, dry cleaner, small business that was out of business and had no — they were made toast basically. But the airlines clearly what happened was not their fault in any way, shape, or form. It wasn't like in 2008-2009."

Buffett believes that airline travel isn't likely to return to pre-pandemic levels because business travel still lags, but he underscores the point that Berkshire still has material airline exposure through other businesses.

"I still wouldn't want to buy the airlines business internationally. People really want to — they want to travel for personal reasons and business travel is the other thing," said Buffett. "We've got a big exposure to business travel, of course, through the fact that we own 19% of American Express and we own Precision Cast Parts, which services the air business. We've still got a big business investment in air travel — a big commitment to it. We wish the 'Big Four' the best, and I think our managements have done a very good job during this period."

2021 Berkshire Hathaway annual shareholders  meeting
2021 Berkshire Hathaway annual shareholders meeting

Jared Blikre is an anchor and reporter focused on the markets on Yahoo Finance Live. Follow him @SPYJared