For Imperiled Airlines, It Keeps Getting Worse

(Associated Press) Air travel has come to almost a complete standstill and industry executives believe the industry could shrink. The situation continues to worsen.

— Billionaire Warren Buffett said over the weekend that he had unloaded his company’s entire stake in major U.S. airlines, believing he was mistaken in his valuation of the carriers. Shares of American, Delta and United Continental plunged between 13% and 14% Monday. Southwest slid 9%.

— Shareholders of the low-cost carrier Norwegian Air Shuttle approved a plan to rescue the company by swapping debt for equity so that it might access some of the government’s guarantees worth 3 billion kroner ($290 million).

The carrier has already laid off 90% of its workforce.

— The European Union approved 7 billion euros ($7.6 billion) in loans and guarantees that the French state is providing to Air France.

Air France will get 3 billion euros ($3.28 billion) in direct loans from the French state and a 4 billion euro ($4.37 billion) bank loan guaranteed by the state, the airline said in a statement.

Stock indexes are down slightly in midday trading on Wall Street Monday, as the market takes a pause following its best month in decades.

Airline stocks had some of the market’s sharpest losses after famed investor Warren Buffett said he’d dumped all his shares in the four biggest U.S. carriers. A ramping up of tensions between the Trump administration and China over the origins and handling of the coronavirus pandemic also weighed on markets around the world.

But big tech stocks, whose momentum has been nearly unstoppable in recent years, continued to rally and helped the market trim its early losses.

The S&P 500 was down 0.3%, as of 11:45 a.m. Eastern time, after erasing most of an earlier loss of 1.2%. The Dow Jones Industrial Average fell 182 points, or 0.8%, to 23,541. The Nasdaq composite, which is full of tech stocks, was up 0.7%.

The dip follows up on Friday’s 2.8% drop for the S&P 500, which itself came after the 12.7% surge for the index through April.

Many professional investors have been skeptical of the market’s huge rally given how much devastation is rolling through the economy. Uncertainty is extremely high about how long the recession will last after businesses shut down worldwide in hopes of slowing the coronavirus pandemic. Even some of Wall Street’s optimists said a pullback for the S&P 500 was overdue after it so quickly more than halved its losses from its February record.

Strategists at Morgan Stanley called such a pullback, which could reach 10%, “a necessary pause that refreshes.” Even while acknowledging the severe recession that everyone sees gripping the world, they say stocks can still resume their climb due largely to “seemingly unlimited central bank support, unprecedented fiscal stimulus” and a possible deceleration in the shocking numbers coming in on the economy.

Monday’s biggest losses were concentrated in airlines, after Berkshire Hathaway disclosed that it sold all its stakes in American Airlines Group, Delta Air Lines, Southwest Airlines and United Airlines. Berkshire Hathaway’s Buffett is one of the stock market’s most famous bargain hunters, and investors around the world parse every clue he gives about investing. Over the weekend, he said he’d made a mistake in how he valued airlines.

American Airlines fell 9.5% for the largest loss in the S&P 500. United, Delta and Southwest all lost 7.4% or more.

Also potentially weighing on markets was Buffett saying that he’s hanging onto his cash and hasn’t made any big deals recently because he hasn’t seen any on attractive terms.