Money returns to Airlines—would they pass the Ed Daly test?

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Buffett’s next big buy: An airline?

 

Airbnb founder Brian Chesky reveals secret plans to launch airline

Big Investors interested in Airlines

Even Warren Buffett had/has severe concerns about investing in the airline business. but he and Brian Chesky, an entrepreneur of a different age (Airbnb), have announced interest in the sector as possible investments.

With $116 billion in cash, Berkshire Hathaway Chairman and CEO Warren Buffett said in an annual letter that the company is poised to make “one or more huge acquisitions.”

So, what might that purchase be? Perhaps an airline.

Buffett, whose company already owns shares of Southwest, American, Delta and United, said he “wouldn’t rule 
out owning an entire airline,” during an interview Monday on CNBC. [FOX BUSINESS]

Airbnb is considering launching an airline as it seeks to transform itself from a home-sharing app to an all-round travel conglomerate.

Brian Chesky, the tech giant’s 36-year-old billionaire founder, told The Sunday Times:

“We’ve seriously considered a lot of things around aviation and we’ve spent a lot of time exploring different concepts.

“We definitely want to make sure, though, that we can get into the end-to-end trip business.” [The Times]

Both of them have financial track records which would suggest that they will succeed. However, the confluence of their expressions of interest, harkens an ancient CAB hearing. The Board had the power to approve or disapprove increase in control of an airline.

Ed Daly, who owned World Airways, decided to buy even more shares; so, there was a hearing on the subject. One of the wily litigators asked Mr. Daly, who was a bit of a curmudgeon[1], a series of questions which demonstrated that Daly’s sale of his stock in First Western Bank and Trust Company, which was making money, for the shares of World, which was not. After completing his cross-examination, opposing counsel asked the Administrative Law Judge for summary judgment (an ALJ would not likely do so). The judge, sensing that he was being set up, replied “On what basis?” The lawyer, with a great sense of comic timing, retorted. “Anyone who would sell a high yielding stock for a loser is CLEARLY UNFIT”, a statutory test for approval. Even Daly laughed!

 

The current DOT process will not likely call for a hearing for either Buffett’s stock acquisition or Chesky’s §401 application, but if either was put on a witness seat, it would be interesting to see how either would respond to the Daly test.

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[1] World, of which Daly was the controlling owner, received a very legalistic letter from a union’s counsel announcing a vote to unionize the carrier. Daly personally dictated a response on the company’s stationery [ALL CAPS] F*UCK YOU, STRONG LETTER TO FOLLOW]. Daly was also a man of great capacity to give to charities and courage—he piloted a plane on an unauthorized airlift of South Vietnamese orphans from



 

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