Berkshire Hathaway's (NYSE:BRK)(NYSE:BRK) successor to legendary investor Warren Buffett revealed three new stock picks made in the first quarter. One of those choices — the first made by Greg Abel as CEO — was an airline company battling with Elon Musk, the world's richest man.
• Delta Air Lines stock is trading near recent highs. Where are DAL shares going?
Berkshire Vs. Musk
Abel and Berkshire Hathaway revealed a new position in Delta Air Lines Inc (NYSE:DAL), buying 39,809,456 shares in the first quarter. This ranked as the 14th-largest position in the Berkshire Hathaway investment portfolio at the end of the first quarter, valued at $2.6 billion and around 1% of assets.
There are four major U.S. airlines that together have a market share of 70% or more. Of Delta Air Lines, United Airlines (NASDAQ:UAL), American Airlines Group (NASDAQ:AAL) and Southwest Airlines (NYSE:LUV), Delta is the only airline to not partner with Starlink.
Starlink is the internet service owned by soon-to-be-public SpaceX, the space company founded by Musk.
Musk recently criticized Delta for passing on Starlink and choosing to partner with Amzon.com Inc (NASDAQ:AMZN) and its Leo unit instead.
"SpaceX requires that there be no annoying ‘portal' to use Starlink. Starlink WiFi must just work effortlessly every time, as though you were at home. Delta wanted to make it painful, difficult and expensive for their customers. Hard to see how that is a winning strategy," Musk said on social media platform X.
Delta will begin installing Leo as its WiFi partner on 500 aircraft in 2028, with free internet offered for SkyMiles members.
American Airlines announced a new partnership with Starlink this week that will see 500 planes carry the internet service in 2027. Reports say the airline company evaluated both Starlink and Leo before choosing the Musk-led company.
Shares of American Airlines were up 7% on Tuesday on news of the Starlink partnership, suggesting the potential value that collaborating with the internet provider can have for a company.
Berkshire Betting Against Starlink Loyalty
When it comes to satellite internet, Starlink may have a huge edge with more than 10,000 satellites and over 11 million global customers.
The company has been signing partnerships with airlines and travel companies around the world.
Consumers who fly select airlines for many reasons and sometimes are loyal to one brand due to rewards, price or comfort. In the future, customers may choose to pick planes that have Starlink, so they can have fast and reliable internet during their flight.
A perfect example of that potential selection of a flight was illustrated by MrBeast. In an interview on the "Good Guys" podcast, MrBeast said that he will prioritize flights with Starlink over convenience, once more flights have internet service.
“I'll stay in the back of the plane if it gives me Starlink. I really don't care,” MrBeast said.
The well-known YouTuber and content creator praised the connectivity of Starlink, which provided reliable internet for a video shoot in Antarctica and having continuous signal in rural parts of Africa.
"Starlink is amazing."
Buffett famously avoided investing in airline stocks for Berkshire Hathaway for the most part. He bought stakes in the four large U.S. airlines mentioned above in the 1990s and later sold the entire stakes in 2020 for an estimated $7 billion loss. Buffett argued at the time that he was selling due to a belief that passenger numbers would not recover after the COVID-19 pandemic and airlines would have too many planes.
Airline stocks later recovered after Buffett's sales.
Many were surprised to see Berkshire Hathaway invest in an airline company again, this time an investment made by Abel. With a potential battle of Delta versus Musk and the other airlines that will have Starlink, time will tell if the Buffett successor is picking the wrong airline.
Image via Shutterstock
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