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- Warren Buffett is too negative about the airline industry’s post-coronavirus outlook, Southwest Airlines CEO Gary Kelly told CNN on Wednesday.
- The billionaire investor’s Berkshire Hathaway conglomerate sold its stakes in Southwest and the other “big four” carriers in April, partly because Buffett wasn’t sure that demand for air travel would bounce back after the pandemic.
- “Mr. Buffett’s point is if the world turns out to be as pessimistic as he said, I think you’re going to see a shrinkage in travel and tourism,” Kelly said. “I’m not sure that I subscribe to that view.”
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Warren Buffett is too gloomy about the airline industry’s prospects after the coronavirus pandemic, Southwest Airlines CEO Gary Kelly said in a CNN interview on Wednesday.
The famed investor’s Berkshire Hathaway conglomerate dumped its stakes in Southwest, American Airlines, Delta Airlines, and United Airlines in April, Buffett revealed at Berkshire’s annual meeting on Saturday. The “big four” airlines have seen passenger numbers plummet as authorities restrict travel and people avoid flying during the outbreak.
“I don’t know if, two or three years from now, that as many people will fly as many passenger miles as they did last year,” Buffett said.
Kelly admitted the Berkshire CEO’s fears weren’t unfounded, but argued that a decline in air travel isn’t inevitable.
“I don’t think anybody knows, and certainly that’s not an unreasonable view to take,” he said on CNN. “It’s a pessimistic one. I am far more optimistic.”
“Mr. Buffett’s point is if the world turns out to be as pessimistic as he said, I think you’re going to see a shrinkage in travel and tourism,” Kelly continued. “I’m not sure that I subscribe to that view, I believe that this too shall pass.”
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Southwest is well-prepared to weather a downturn in business and international travel, Kelly said. “We’ve got low costs, we’ve got a strong balance sheet, we’ve got plenty of cash.”
However, the carrier will be forced to slash headcount if passenger numbers don’t rebound.
“If it doesn’t improve from here, we would have to dramatically downsize,” Kelly said. “We have a lot of cash today but we burned through almost $1 billion in the month of April.”
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