Shares of United Airlines' parent company soared to an all-time high Tuesday, after it revealed strong performance in April on several revenue metrics. That's despite being linked to dead rabbits, wrong-way flights and a bloody passenger over the course of the month.
Shares of United Continental Holdings had risen 5% as of late Tuesday afternoon, to $78.48 from $75.69, edging the company's market capitalization up by $867 million. Despite consumers' apparent dissatisfaction with airlines in April, passengers were still taking United flights. Last month, consolidated revenue per mile travelled by a passenger rose 7.4% in the month that David Dao was forcibly removed from his flight in a high-profile incident caught on video. The company also set a record with the fewest cancellations during a month in all of United's history.
Despite all the public relations headaches, the numbers are what matter to investing titan Warren Buffett and hedge fund manager Brad Gerstner of Altimeter Capital — who both reiterated their confidence in the airline industry at high-profile investing events in recent days. Even if the Oracle of Omaha doesn't exactly agree with the idea of hedge funds, he does agree with Gerstner on at least one thing: Airlines look poised for a come back.
"Our idea today is United Airlines," Gerstner said at the Sohn Investment Conference on Monday, an event at which Wall Street's finest give their biggest stock picks of the year."What do you need to believe to invest in United? You have to believe that the competitive dynamics really have changed as a result of consolidation."
Over the past decade or so, airline companies have undergone a string of mergers and acquisitions to combat weak profits — leaving just four major airlines, one of them being United, in control of roughly 70% of the U.S. market. That has left consumers in the U.S. with very few air travel options.
Airlines as a whole have come under increased scrutiny after Dao was forcibly dragged off a flight in early April. And over the course of the month, United was hit with even more negative press, Delta was criticized for kicking a couple and their son off a plane, while Qantas CEO Alan Joyce took a pie to the face.
But the negative press has done little to worry investors such as Buffett and Gerstner.
"One of the things they found is that a very high percentage of people are very price conscious," Buffett told CNBC following Berkshire Hathaway's annual shareholders' meeting. "They may become like cattle cars, ... but a significant percentage would rather be treated that way and fly for X than have far more leg room (and other benefits) and fly for X plus 25%."