MORGAN STANLEY: It's possible that Warren Buffett will buy an airline

Warren Buffett has recently been loading up on airline stocks.

And now a team of Morgan Stanley analysts thinks it's not entirely impossible that the billionaire investor could buy an airline.

"[B]ased on historical precedent and the state of the industry - we view a full-scale acquisition of an airline by Berkshire as a possibility and not worth dismissing, particularly if the stocks weaken," the team, led by equity analyst Rajeev Lalwani, wrote in a note to clients on Wednesday.

Although, the team noted that, to their knowledge, Berkshire hasn't commented on the possibility of buying an airline.

The historical precedent to which the team is referring to is Buffett's earlier interest in the rail industry.

"An interest in industries with structural improvement and the gradually growing stakes are fairly consistent with Berkshire's approach to acquiring Burlington Northern Santa Fe (BNSF) in 2009 for ~$26.3 billion," they argued.

"First, the Rails had also seen an improved industry structure resulting in a supply-demand balance and pricing power following a period of capacity cuts and consolidation. Second, the BNSF acquisition was preceded by positions in peers, NSC and UNP."

As for which airline, the team believes that Southwest is a "plausible" candidate given various factors including the company's domestic focus, range of growth opportunities, and tenured management team. By comparison, they write that legacy airlines have more complex operations and risk.

Buffett has previously stayed away from airlines. "Investors have poured their money into airlines and airline manufacturers for 100 years with terrible results," he once said. "It's been a death trap for investors."

But back in November, Berkshire Hathaway took new positions in American Airlines, United Continental, Delta Airlines, and Southwest Airlines.

"What does Buffett see in airlines? An improved industry that looks very different from the past," argued the Morgan Stanley team in their note's conclusion.