Warren Buffett's Berkshire Hathaway sold the 'Big Four' airline stocks because they were too volatile, American Airlines CEO says

• American Airlines CEO Doug Parker discussed Warren Buffett's bet on the "Big Four" US air carriers.
• Buffett sold them last year because the pandemic underlined the industry's volatility, Parker said.
• Parker said American Airlines doesn't deserve Buffett as a shareholder right now.

Warren Buffett and his team took a leap of faith when they invested in the "Big Four" US airlines in 2016, and dumped them in April 2020 because the industry was too turbulent for them, American Airlines CEO Doug Parker said on The New York Times' "Sway" podcast this week.

"They had been out of airlines for so long, and Warren had made statements about how incredibly stupid it was to invest in airlines, and here they were investing again," Parker said. "It was a big deal for them."

Parker revealed that Ted Weschler, one of Buffett's two portfolio managers at Berkshire Hathaway, gave him a heads-up when Berkshire started buying his company's stock. Berkshire also purchased roughly 10% of the others in the Big Four - Delta Air Lines, United Airlines, and Southwest Airlines.

Buffett was betting that passenger numbers would keep growing, share buybacks would continue, and the carriers would at least retain their value over the next decade. However, his expectations were thrown up in the air by the pandemic bringing travel to a screeching halt, and the airlines accepting government bailouts that included repayable loans, stock warrants, and restrictions on buybacks and dividends.

"This proved to them that it's still more volatile than they thought, and that's not the world they want to play in," Parker said about his industry.

The American Airlines chief seemed to acknowledge that his company's stock might not be the safest asset for Berkshire to own for the next 50 years. "We get the shareholders we deserve, and we don't deserve them right now," he said, referencing Buffett's famous saying that managers' actions determine their investor base.

Parker stopped short of saying Buffett was wrong to sell the Big Four airline stocks, which have all rallied strongly over the past 16 months. But he noted that "no one makes every call right."

Indeed, "Sway" host Kara Swisher recalled Buffett making a terrible prediction to her: "He was wrong about the internet. He told me the internet was a fad."