1997: Will Berkshire help turnaround US Air?

AUDIENCE MEMBER: Martha Copeland (PH) from San Francisco.

My question involves the headwinds which face USAir. Are you considering redeploying assets? Or how will your management plan to improve this company?

WARREN BUFFETT: Well, we’re just an investor in US — they call it now US Airways — but we’re just an investor. We’ve owned a preferred stock for almost eight years.

The company had some very rough going. Charlie and I would not have thought its chances for survival were very good, even some years back.

But it’s done quite well lately. Stephen Wolf has done a terrific job of running it.

So as of the middle of April, all of our dividends are — were caught up, current. We’ve received, I don’t know, 260 or ’70 million in dividends in the last eight years.

But we have nothing to do with managing the company. Matter of fact, there are some people that might have noted that when Charlie and I left as directors, that was when the fortunes of the company turned abruptly upward. (Laughter)

But — and we feel very good about what Stephen Wolf has done. I mean, he — there’s no tougher job than running an airline. That is not a job I would wish on anyone. And he’s improved the operating performance dramatically, and the financial performance has improved. And better yet, the preferred dividends have been paid. So we thank him for that, but we have nothing to do with it.

By the terms of our preferred, in just a little over two years, we are due to be paid back our principal amount. It was really a loan in equity form, with a kick — possible kicker on the upside because of the conversion privilege on the preferred.

We would have sold the conversion privilege for nothing a few years ago, but it actually is not so far away now. The stock’s in the low 30s, and our conversion is in the high 30s. So we actually have some chance of even having conversion value on that. It’s been a very pleasant surprise.

You know, I made a mistake in getting into it, but Mr. Wolf is — seems to be capable of nullifying my mistake.

Charlie?

CHARLIE MUNGER: Pass. (Laughter)

WARREN BUFFETT: We’ll give him this (inaudible). (Laughter)