This fund manager says he will never buy an airline stock again

“Never again”. That’s the timeline at least one fund manager has for wading back into beleaguered airline stocks, including Air Canada (Air Canada Stock Quote, Chart, News TSX:AC).

Barry Schwartz, chief investment officer and portfolio manager at Baskin Wealth Management, appeared on BNN Bloomberg’s “Market Call” Monday to talk about the aviation sector and bearish new sentiment from Canada’s largest airline.

Schwartz said despite the fact that airlines were doing historically well before the COVID-19 pandemic, everything has changed in the time since. That today led him to make a declaration.

“If you look at Air Canada stock over the prior few years it was one of the best performing stocks on the TSX. The stock absolutely recovered I think it was from $3.00 to $50.00 And then here we are with the pandemic,” he said. “Would I be touching the stock? I think I’m gonna follow what my pal Warren Buffett said on the weekend. He dumped the airlines and we sold out Delta for our clients in March. I am never going to buy an airline stock again.”

In a conference call with analysts Monday, Air Canada CEO Calin Rovinescu said the coronavirus was not a blip, nor will its impact be short term, as some speculative investors had hoped.

“We’re now moving through the darkest period ever in the history of commercial aviation, significantly worse than the aftermath of 9/11, SARS, and the 2008 financial crisis,” he said. “We expect that both the overall industry and our airline will be considerably smaller for some time, which will unfortunately result in significant reductions in both fleet and employee levels.”

Rovinescu said Air Canada was “effectively… in a state of hibernation”.

Despite his strong words Schwartz, however, did not close the door completely on the airlines.

“It’s an upsetting world, it’s a changed world. It’s very hard to recommend Air Canada here, but there’s a potential that we could all be wrong and things return back to normal in a heartbeat. And, you know, for a speculative investor there could be opportunities with the airlines. Just because Warren Buffett sold them, just because it looks very dark right now, doesn’t mean it’s the end of times for airlines,” he added.

At Berkshire Hathaway’s AGM, Buffett said the firm had dumped all its airline stocks. Berkshire had held positions in the four largest U.S. airlines; Delta, American, Southwest and United.

“We made that decision in terms of the airline business. We took money out of the business basically even at a substantial loss,” Buffett said. “We will not fund a company that — where we think that it is going to chew up money in the future,” he said.

Buffett’s recent dalliance into airline stocks was a surprise to many. In his 2007 annual letter to shareholders, he described them as “bottomless pits”.

At press time, shares of Air Canada were down 9.17 per cent to $17.53.