Warren Buffett Mulls Buying An Airline

When Warren Buffett—arguably the most famous of all U.S. investors and a nonbeliever in airline stocks—started buying Delta and United and American and Southwest over the past few months, Wall Street lifted an eyebrow. But now the chatter has turned into a much more fascinating prospect: that Buffett’s Berkshire Hathaway Group will buy an airline outright.

“Warren Buffett’s decision to take stakes in the four largest U.S. airlines could be a first step to eventually taking over one of the companies, analysts said, citing his history in the railroad industry,” Bloomberg reported today.

“We view a full-scale acquisition of an airline by Berkshire as a possibility and not worth dismissing, particularly if the stocks weaken,” Morgan Stanley analysts led by Rajeev Lalwani said in a note to clients.

Berkshire vice chairman Charles Munger’s comments comparing the stance to the way Buffett felt about railroads only seemed to confirm the talk. Railroads were “a terrible business for about 80 years,” he said at an event last week in Los Angeles. “But finally they got down to four big railroads and it was a better business. And something similar is happening in the airline business.”

Berkshire paid $26 billion for 77.5% of Burlington Northern Santa Fe in 2010.

And in an interview with Charlie Rose last month, Buffett noted that buying and moving planes would be easy compared with the expense of laying train tracks across thousands of miles.

At Cowen & Co., meanwhile, a recent note to investors also mentioned the possibility.

“Every year there is a surprise in the industry,” Cowen’s Helane Becker said. “This year, we believe a surprise may be that a major airline gets acquired, potentially by Berkshire, or goes private on its own. Airlines are labor- intensive and capital-intensive, so they don’t make the best LBO candidates, but stranger things have happened.”

And of course it’s possible that The Oracle is only human, and falling prey to the same gravitational force of travel as all of us in the industry.

“There is a certain romance to it,” Buffett told Rose.