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Berkshire Hathaway expecting large Q1 losses


Berkshire Hathaway expecting large Q1 losses

Warren Buffett CEO of Berkshire Hathaway at their annual shareholder meeting
Photo: AP

Multinational conglomerate Berkshire Hathaway will today release its first quarter earnings report.

The account is expected to reveal a huge net Q1 loss and provide further insight into the magnitude of financial damage done to the airline industry by COVID-19. The pandemic may have obliterated roughly $64 billion from Berkshire Hathaway’s equity portfolio, which includes hefty and rapidly sinking investments in the four largest US airlines.

The virus poses an unprecedented threat to commercial aviation. Worldwide flights are down nearly 80% as of early April, and the International Air Transport Association forecasts an aggregate annual revenue loss of more than 50%. That Berkshire Hathaway, a globally recognised financial influencer, sold millions of Delta and Southwest shares last month signals a potentially fundamental shift in industry value. High fixed costs and government bailouts could launch industry-wide debt skywards.

Some Wall Street analysts have suggested that certain measures—such as preemptive capacity reduction—could alleviate the effect of reduced demand, although the impending recession will severely constrain recovery as the year progresses. Expect the post-lockdown return of civil aviation to emerge in stages, with domestic flights likely to resume in Q3 and international travel to return more slowly. Accelerated sector consolidation is increasingly likely as available liquidity dwindles and highly leveraged firms are forced into insolvency.

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