Warren Buffett, the chairman and CEO of Berkshire Hathaway, said Boeing has a lot of work to do as it looks to confront problems with its embattled line of 737 MAX aircraft after two devastating crashes.
Speaking at the Gatehouse’s Hands Up for Success luncheon in Grapevine, Texas, the well-regarded value investor said he remains bullish on the airline sector, where Berkshire is a big owner, but said aeronautic and defense contractor Boeing has a work to do to resolve issues that have grounded its 2017-vintage 737 fleet.
“Obviously, Boeing has a lot of work to do, very promptly,” Buffett told CNBC’s Becky Quick at the event.
The Boeing BA, +0.06% 737 Max was grounded world-wide on March 13 on an executive order by President Donald Trump soon after a deadly crash involving a Max in Ethiopia on March 10, coming less than five months after a Lion Air crash in Indonesia. (U.S. airlines are allowed to shuttle the planes since but cannot carry passengers.)
Read: Capt. Sullenberger on the FAA and Boeing: ‘Our credibility as leaders in aviation is being damaged’
The Federal Aviation Administration had been accused of being slow to act to ground the jets, which have had issues with new antistall mechanisms, but acting FAA administrator Daniel Elwell, recently has defended the agency’s timeline for grounding the fleet.
Buffett doesn’t own a stake in Boeing but the conglomerate holds 55 million shares in Southwest Airlines Co. LUV, +1.24% with Southwest seen as having the most exposure to the 737 MAX fleet, representing about 3.4% of its capacity, according to Cowen. Berkshire also owns significant stakes in other air carriers, including Delta Air Lines Inc. DAL, +0.70% and American Airline parent American Airlines Group Inc. AAL, -0.13% as of the most recent regulatory filings.
Shares of Boeing are down nearly 15% in March but still boast a 16.2% year-to-date gain. That compares with a 10.1% gain for the Dow Jones Industrial Average DJIA, +0.36% thus far in 2019 and advance of 12.1% for the S&P 500 index SPX, +0.36% according to FactSet data.
Southwest’s stock is off 9.9% to date in March but is set for a 8.7% on the year.
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