Warren Buffett is investing $8 billion in an industry he once called a 'death trap'

This week, Warren Buffett's Berkshire Hathaway disclosed a significant commitment to the US airline industry, saying it had raised its stakes in Delta Air Lines and American Airlines and taken a new position in Southwest Airlines.

According to a regulatory filing, Buffett purchased $2.2 billion in shares of Southwest. He also owns about $2 billion of American, United Airlines, and Delta.

The investments total more than $8 billion.

It's a striking about-face for the legendary investor, who at his company's 2013 annual meeting called the airline industry a "death trap for investors."

So what has changed?

First, the price of crude oil is now half of what it was in 2013. Cheaper jet fuel — traditionally the most significant cost outlay for an airline — has pushed US airline profitability to unprecedented levels.

Over the past two years, American, Delta, United, and Southwest have reported record profits.

An American Airlines Boeing 787. Flickr/John Taggart

US airlines have also invested billions of dollars in next-generation aircraft, interiors, and technology. This includes the arrival of state-of-the-art fuel-efficient airliners such as the Boeing 787 Dreamliner, Airbus A350, Boeing 737 MAX, and the Bombardier C-Series.

In addition, American, Delta, and United have invested heavily in premium cabin seating and amenities aimed at high-spending business travelers. As a result, the overall quality of the four airlines' product offerings has significantly improved in terms of luxury, connectivity, and efficiency.

And the landscape of the US airline industry has changed dramatically in the past few years. Overall, airlines in the US are in a much better place now.

Read More: http://www.businessinsider.com/warren-buffett-invests-in-airlines-american-delta-southwest-2017-2
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