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Warren Buffett on Investing in the Airline Industry: "... despite putting in billions and billions and billions of dollars, the net return to owners from being in the entire airline industry, if you owned it all, and if you put up all this money, is less than zero."
Known as the "Oracle of Omaha," Warren Buffett is one of the most revered U.S. Investors of our time.  In the PBS Home Video entitled "WARREN BUFFET talks business", Mr Buffett makes some frank admissions about investing in the airline industry in an 1995 speech to students at the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill.  We have transcribed the relevant excerpt below.  As a bit of background, airline carrier service was first started at Buchanan Field in 1986 by Pacific Southwest Airways (PSA), which was bought in 1988 by USAir. 

STUDENT: "Mr. Buffett, what prompted you to make an investment in USAir given the fact that this is such a cut-throat industry, and certainly not transparent and easily understandable?" 

MR. BUFFETT: "Well, I think probably the best answer is temporary insanity." [audience laughter]. 

"The fella that runs USAir is a wonderful guy, but he just happens to be in an extraordinarily tough business.  And the interesting thing is that I had written something for [Benjamin] Graham’s book in the early 70’s about how the airline business was about the toughest business there was." 

"And the interesting thing is, of course, is that if you go back to the time of Kitty Hawk, net, the airline transport business in the United States has made no money.  I mean, just think if you had been down there at Kitty Hawk, and you had saw this guy [Wilbur Wright] go up [in the air], and all of a sudden this vision hit you that tens of millions of people would be doing this all over the world some day and that it would bring us all closer together and everything, and think my God this is something to be in on." 

"And despite putting in billions and billions and billions of dollars, the net return to owners from being in the entire airline industry, if you owned it all, and if you put up all this money, is less than zero." 

"If there had been a capitalist down there [at Kitty Hawk the day the Wright brothers made their first flight] the guy should have shot down Wilbur!  I mean … [audience laughter].  You know… one small step for mankind, and one huge step backwards for capitalism!" 

"But anyway…. So along comes 1989 and I’ve got a lot of cash.  And no one misled me in any way shape or form.  And I mean this was 100% my decision [to invest in USAir].  And I put money in it.  Seth Scofield [CEO of USAir at the time], you can’t find a better human being or manager than Seth Scofield, but he is operating with revenues based on market factors and cost that are not based market factors, and that’s a recipe for a lot of trouble."

"So I now have this 800 [telephone] number, and if I ever get the urge to buy an airline stock I dial this number.  And I say my name is Warren, and I’m an "air-o-holic," and then this guy talks me down on the other end [of the line]…."
 

 WARREN BUFFETT talking business

FROM THE BACK COVER--
"In a rare television appearance by one of America's most sucessful investors, Warren Buffett shares his wit and wisdom with the students at the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill."
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Why this excerpt is relevant...
    Many in the local Aviation Community blame the loss of air carrier service at Buchanan on the lack of good management and competency at USAir.  Mr. Buffett's comments are directed to his perception of the competency of USAir and the market factors that USAir had to deal with.
    In providing this excerpt, we had debated whether to edit out Mr. Buffett's more derogatory comments about the airline industry.  However, we felt that if we did edit the Buffet excerpt in any manner, the local Aviation Community would accuse us of selectively editing Mr. Buffett's comment to portray the airline industry in the worst possible light.