Source: insapphowetrust.

Warren Buffett is an excellent stock picker. But looking at his stock-picking success only shows half of his incredible skill.

In Buffett's case, it's not about the stocks he picked. Often, it's about the stocks he didn't pick -- stocks he would never own.

One of Buffett's biggest mistakes
In 1989, Warren Buffett had the opportunity to put $358 million to work in US Airways (NYSE: LCC). He received a preferential deal. For his investment in US Airways preferred shares, he'd earn a 9.25% dividend each year. This investment would be great for a company like Berkshire Hathaway (BRK.A 0.58%) (BRK.B 0.38%), which had billions to invest from its insurance businesses.

Unfortunately, the investment didn't pan out. Buffett, who had long been a critic of airlines, thought this time might be different. It wasn't. US Airways had costs equal to $0.12 per passenger mile. A new competitor, Southwest, came to market with a business model that put its costs at $0.08 per passenger mile.

Since air travelers have little, if any, loyalty to the company behind a plane, US Airways found itself financially stressed. Buffett eventually got out of the investment, an event he later described as pure luck.

Why airlines aren't good investments
Since the birth of the industry, airlines have produced negative cumulative profits. That is, if you add up the profits and losses of every American airline through history, the sum would be negative. So far, this has clearly been no place to put money to work.

"Hey, nice machine! Just don't ask me to invest in it."

On several occasions, and in the 2008 Berkshire Hathaway annual report, Buffett said the following about airlines:

"If a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down."

Buffett isn't the only investor to avoid airlines. Airline industry legend and former chairman of American Airlines (AAL 0.14%) Robert Crandall once warned his workers that the airline he led was a terrible investment. He once said the following:

"I've never invested in any airline. I'm an airline manager. I don't invest in airlines. And I always said to the employees of American, 'This is not an appropriate investment. It's a great place to work and it's a great company that does important work. But airlines are not an investment."

Keep in mind, Robert Crandall isn't just another stock picker or analyst. He's a former airline executive who has won countless awards for his work in the airline industry. If he doesn't believe airlines are investable, how should we?

The fact is, operating an airline is costly. Customers aren't loyal. And unforeseen events, like the recent deep freeze across the United States, can cost the industry millions. Some estimate airlines stand to lose $50-100 million just from cold weather in January.

The key takeaway
Some industries are great for investors. Some are great for consumers. Airlines fit in the latter category. They invest billions of dollars of investors' capital to send passengers from one side of the world to the other, quickly and safely. But when it comes to rewarding shareholders, very few have succeeded. And for that reason -- the fact that airlines are better for customers than shareholders -- Buffett's Berkshire Hathaway will likely never, ever invest in another airline.