Imagine the Price Increases If Billionaire Warren Buffett Buys Southwest Airlines!
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Southwest is without a doubt my favorite US airline. They’re a Chase airline transfer partner with a no blackout date policy. So it’s easy to use points to save on airfare to fantastic destinations. And they offer the Companion Pass, which is the best deal in travel. My wife and I used it last year to save nearly $3,000 on airfare!
All of these amazing perks could be in jeopardy if the speculation about Warren Buffett buying the airline comes true. Today, investment bank Morgan Stanley shared a detailed analysis about why Southwest would be a great purchase for the legendary investor. This idea should scare Southwest frequent flyers.
Buffett buying Southwest is pure speculation at this point. However, it’s not completely out of the realm of possibility. He currently owns ~$2.8 billion worth of Southwest shares. As of this writing, the airline is currently valued at ~$35 billion. That’s pocket change for Mr. Buffett considering his company, Berkshire Hathaway, recently reported they have ~$116 billion in cash.
So why am I concerned about this potential acquisition? Several years ago, Warren Buffett was quoted as saying:
The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business.
That’s great thinking if you’re a billionaire looking to add to your net worth. But what about the consumer and folks who love to get Big Travel with Small Money?
One of the reasons Southwest is so popular is because they offer cheap fares. Just yesterday, we wrote about a Southwest fare sale!
We’ll have to stay tuned to see what happens. In the meantime, I’ll continue taking advantage of my Companion Pass through the end of 2018! And I’m still looking forward to Southwest flights to Hawaii!
Hat tip: CNBC
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