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Huge Purchase by an Independent Director of Southwest Airlines – Insider Weekends

  • October 6, 2024

Southwest Airlines Company (LUV): $31.25

Market Cap: $18.72B

Enterprise Value: $17.83B

Spirit Airlines saw its shares plunge by 37% this Friday, after the Wall Street Journal reported on Thursday that the airline was in talks with bondholders to explore a Chapter 11 bankruptcy. This news comes after the failed JetBlue Airways (JBLU) and Spirit merger that regulators unfortunately decided to block. It also further supports the theory that airlines are a notoriously difficult business. Warren Buffet is known for his distaste of the airline industry, after being burnt by various companies such as US Airways (now American Airlines) in the past, and stated the following in his 2007 Annual Berkshire Letter:

The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down. The airline industry’s demand for capital ever since that first flight has been insatiable. Investors have poured money into a bottomless pit, attracted by growth when they should have been repelled by it.

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