Billionaire investor Warren Buffett‘s Berkshire Hathaway Inc. is reportedly the largest single shareholder of United Airlines parent’s United Continental Holdings (UAL) with a stake of 28.95 million shares, or 9.2% of the shares outstanding (according to latest SEC filings).
So far Buffett has not spoken about this United self-inflicted mess (United Express Flight 3411 incident wiki page) yet but we may learn something from history. You see, Buffett biography The Snowball‘s author Alice Schroeder reported Buffett (an American Express investor) wrote the following during the 1963 Salad Oil Scandal (or “Soybean Scandal”) [with emphasis added],
“It is our feeling that three or four years from now, this problem may well have added to the stature of the company [American Express] in establishing standards for financial integrity and responsibility which are far beyond those of the normal commercial enterprise.“
“Buffett wrote that two paths lay before the company, and that an American Express that took responsibility and paid the $60 million [note: remember, this is 1963!] to the banks would be worth very substantially more than American Express disclaiming responsibility for its subsidiary’s acts.” He described the $60 million payment as inconsequential in the long run, like a dividend check that got “lost in the mail”.“
Using history as guidance, what would Warren Buffett tell United Airlines to do?
My guess is Buffett would advice United CEO Oscar Muñoz (or whoever replaces him) to take responsibility and pay a reasonable amount to settle the pending lawsuit as a United that take responsibility “would be worth very substantially more than United disclaiming responsibility“.
And in an imaginary world that Muñoz (or whoever replaces him) doing the RIGHT THING, “this problem may well have added to the stature of the company [United] in establishing standards for integrity and responsibility which are far beyond those of the normal commercial airlines.” Yes, things need to be done RIGHT now, and United need to lead in “establishing standards for integrity and responsibility which are far beyond those of the normal commercial airlines.”
We will see what will happen in time. With Berkshire’s $2 billion (April 13 closing price of $68.07 multiply by 28.95 million shares) investment holding in United, I won’t be surprised reporters will want to ask what Buffett thinks about this mess next time he is interviewed on CNBC or other news media. We will see if I’m right or wrong.
April 13, 2017 Update:
Sen. Franken (April 11, 2017), “Sen. Franken Presses United Airlines to Explain Forcible Removal of Passenger on Weekend Flight” [emphasis added]
“– A federal cap exists on the amount of money a commercial airline may compensate a passenger for being involuntarily denied boarding or rescheduled for a flight. Why was the full amount of $1,350 not offered to passengers aboard Flight 3411 before the passengers were involuntarily denied boarding and forcibly removed? Does the $1,350 cap serve any benefit to consumers?
– Was the Louisville-bound flight oversold prior to including the four United Airlines personnel reported to have been granted seats to enable them to reposition from Chicago to Louisville? If so, were there alternative flight or ground transportation options for these four crew members that could have ensured they arrived in Louisville with sufficient time to board their next flight? Did United Airlines have the ability to assign other crew members to that flight departing from Louisville?
– Does United Airlines limit the number of airline tickets that may be oversold on each flight?“
LA Times Op-Ed. “Let Richard Branson kill United Airlines”