Are the fractionals recession proof?

[7777]

Thoughts?

 

[Count]

NO, do you think there are any Bear Stearns people at Netjets?

 

[cush]

Looks like we're going to find out! But, what tends to happen is we lose a few owners out the bottom, but gain others as they sell their fully owned aircraft for shares.

 

[realityman]

NOTHING is fully recession proof. However, I do believe the fractionals have a better chance at successfully weathering bad economic conditions than most companies that cater to the average Joe.

 

[CALRepublic]

NOTHING is fully recession proof. However, I do believe the fractionals have a better chance at successfully weathering bad economic conditions than most companies that cater to the average Joe.

I second that. A reccesion is going to hit everyone. NOBODY is recession proof....

 

[Some guy]

The people who are truly rich will always have money.

There are more millionaires in the United States today than there has even been.

No, we are not recession proof but I don't think we get hit nearly as hard as other industries. I think if oil hit $250 a barrel today, that would hurt more than a recession.

SG

 

[glasspilot]

I don't know the answer but I suspect the above posts are correct that nothing / nobody is recession PROOF.

I do know that I'm glad I fly a plane that goes just shy of 500 miles in one hour on less than 100 gallons of gas. I'm hoping that makes me furlough proof.

 

[StarHustler]

Not recession proof, but perhaps, recession resistant...

 

[BlueandWhite]

I've always assumed that frac's would do better than airlines in times of recession, but have data to back that up.

My assumption: Fuel would be a higher percentage of the cost of an average airline ticket than it would be for for the cost of owning a frac share. Frac customer pays more for fuel, but a lot more for just owning part of a jet. I might be way off, but I'd love to see if anyone can provide more hard #'s.

 

[CALRepublic]

I've always assumed that frac's would do better than airlines in times of recession, but have data to back that up.

My assumption: Fuel would be a higher percentage of the cost of an average airline ticket than it would be for for the cost of owning a frac share. Frac customer pays more for fuel, but a lot more for just owning part of a jet. I might be way off, but I'd love to see if anyone can provide more hard #'s.

Don't forget one thing, If the airlines raise their ticket prices to counter the price of oil, NetJets still has to buy 200,000 airline tickects (or whatever the amount is). Let's not just look at it as how much we're paying for fuel, is everything

 

[gunfyter]

We already know what happens during a recession. Been through it Airlines furlough and the fracs do not. Then airline pilots come to the fracs and do not return to the airlines.

 

[Sparse]

We already know what happens during a recession. Been through it Airlines furlough and the fracs do not. Then airline pilots come to the fracs and do not return to the airlines.

The fractional industry took off as a result of 9/11 and the hassle factor of airline flying. The airlines may have hit a recessionary environment after 9/11 but the US economy did not. The fracs have not really been through a recession. My prediction is it will weed a few out but for the most part will be ok. I agree, the business may see new customers as some individuals and companyies sell of their fleets. The revenue side could be minimally effected but the expense side is iffy (airline tickets, fuel cost for deadheads, etc). When gas is high everything goes up.

 

[doh]

We already know what happens during a recession. Been through it Airlines furlough and the fracs do not. Then airline pilots come to the fracs and do not return to the airlines.

That has been my experience.:beer: Let's hope it holds true.

 

[climbhappy]

i'd say given the wealth accumulated by the baby boomers, that demand will far outpace cyclical changes in the economy.

 

[Gator1999]

Proof that we are in a recession...Tiger Woods trades down to a G200 from his G4...God, that's almost as bad as riding in the back of a CRJ. Tough life...

 

[Galaxy]

Proof that we are in a recession...Tiger Woods trades down to a G200 from his G4...God, that's almost as bad as riding in the back of a CRJ. Tough life...

Wow times are getting tough. What next for ole Tiger??? Will he start pushing KIA's or the Smart car when Buicks don't make the sales quota.

 

[flyzimex]

XOJet?

I know a lot of you guys don't consider XOJet a frac, but since this could be an issue for any section of aviation, I think I got a valid question here.

Since XO is heavily backed by big financial institutions, Lehman being one of them, are they at greater risk than others or is the promised funding (unless XO already got it in full) at risk. Could this jeopardize their expansion plans?

Yes, I do know that Lehman today beat the WS expectations, but we have all very recently seen how quickly things can turn much for the worse (Bear).

FZ

 

[RCA]

Tigers like a F.A.R.

Part $80,000,000/1 year

A. No one is recession proof, except Tiger Woods.

 

[7777]

Your question is a good one. It is the kind of stuff I have been thinking of as well and ultimately the reason I started this thread for others opinions.

I don't think the 9-11 type situation hurts fractionals as much as it would a 121 carrier. I think that was proven pretty much during that time. Other than SWA which wisely hedged it's fuel prices, all the other airlines took it in the shorts (NWA, DAL, United, AA) some way or another.

As was mentioned, the people with the money have ways around stuff like this (alot of money, wise investments, overseas investments, ect.) that allow them to continue using the fractionals as needed. Fractionals still stay more viable as a form of pilot employment than the majors.

If said fractional has big time backing (BerkshireHathaway, Citation/Textron, ect.) they have the means to stay afloat and 'weather out the storm'.

I am not saying I am correct on this but I am thinking this may be the case. Who really knows? I certainly don't and that is why the thread was started.

I have a GREAT military flying job. The military pilot weathered the aftermath of 9-11 very well. Yeah we have been busier than a 1 legged man in an ass kicking contest since then, with the numerous deployments and all, but we have job security.

I have been looking at NetJets, Citation Shares and others and think they should do o.k.. If for nothing more than their customers can and have kept them busy during this post 9-11 time frame.

NetJets has shown the most growth. Citation Shares has shown good, stable growth as well. With their goal of not wanting to be the biggest, that will work in their pilots favor as well, IF the time comes to downsize and cut some of the 'fat.' Planning for lean growth during these times is a wise idea in my mind.

Again, I am just a military pilot that has watched the aviation industry from the military side for over 20+ years and am forming these ideas based on that. I could be totally wrong but that is how I am seeing it right now.

I would like for nothing more than the economy to boom and aviation to continue growing and getting stronger. I don't honestly think this recession is going to be as bad on our industry as it could be. I believe the American economy has turned for the betterment of aviaiton following recessions of past.

Again, just my .02 cents. An observation from a hard working American.

 

[Publishers]

It would be very naive to think that a terrible economy is not going to have a negative impact. Let's look at a couple of different areas. First, the jet cards. I think the Marquis card kind of customer may well be the first impact that will effect the fractionals. Secondly, even the wealthy tend to get concerned and push off buying decisions when there is uncertainty in the air. Demand having been so strong has meant that sellers have been able to move their problem aircraft to that demand especially overseas and so pressure has not really hit many as hard as it could if they were stuck with it. Netjets Europe is expanding well so it might help the year rather than hurt as in the past.
Even so, these companies need to sell new aircraft positions and dispose of old ones and if anything impedes that, things could get ugly quick.

 

[skyaddict]

Definitely alot more recession resistant than the airlines, hands down. But if the recession is long enough and deep enough it will take no prisoners at some point, and everything points to a longer and deeper one than "usual", certainly longer and deeper than the artificially shallow and short post tech bubble burst.

I don't envy Bernanke trying to walk this fine line- a major mis-step could melt us down to global depression at this point. Greenspan really screwed him- and us - all over with his bubble blowing legacy, this current mess was completely predictable- there never should have been a housing boom in the first place. I don't know what crack Greenspan was smoking.

I think the "best case" for the U.S. economy is a fairly decent recession followed by years of slow growth vs. the rest of the world ("worst case" being a global depression worse than 1929). But those companies expanding overseas will at least get the benefits from our growing overseas debtors.

 

[gunfyter]

Of course there is a negative impact. On profits. Profits will be reduced or disappear temporarilly until the recovery comes. It always does.

But I think Frac pilots will keep their jobs and this is the major concern of people in this business when considering what an economic downturn means.

I don't see any of the major Fracs folding up their tents... in a Recession.

The greatest threat is not a recession but repeal of the Tax-Cuts for the Rich.

 

[7777]

The greatest threat is not a recession but repeal of the Tax-Cuts for the Rich.

That is something I never figured into my thought process here. That is an excellent point and I wonder just how much of an effect that would have if the government starts sticking it to them. Very good point.

 

[netjetwife]

The fractional industry took off as a result of 9/11 and the hassle factor of airline flying. ....

For these reasons I think that the fracs are better positioned to weather an economic downturn than the airlines are. The security measures are here to stay, with accompanying inconveniences the frac owners aren't inclined to put up with and/or have no time for. The hassle factor has not improved and may even get worse as the airlines make cuts to offset rising fuel prices. Frac pilots see many examples of poor service their pax would never tolerate. On my husband's last flight home the flight was delayed because a FA wasn't available. He calls those hassles "job security". The same conditions that brought growth to the frac industry provide insight into why frac pilots are less likely to be furloughed than those in the airlines. It's also one of the reasons my husband isn't interested in returning to AA.

 

[Diesel]

Simple.... 5 year contract.

The barriers to exit are quite high.

Percentage wise you will lose a few and gain a few.

One thing is for certain. The airlines will furlough.

 

[gunfyter]

Thats right Diesel. 5 yrs.

By the time you make a decision to stop flying fractional... the economy has turned and HAPPY DAYS ARE HERE AGAIN.

 

[sqwkvfr]

I read somewhere a few years back that the number of millionaires actually increases shortly after an economic downturn.

The reason was that people being laid off go into business for themselves and find success.

Perhaps not recession proof, but I'd say that the fractionals are in the one of the best positions of any segment of aviation to survive an economic downturn.

 

[squonk]

Proof that we are in a recession...Tiger Woods trades down to a G200 from his G4...God, that's almost as bad as riding in the back of a CRJ. Tough life...

He's been on the 200 a couple of years now hasn't he?

 

[squonk]

Publishers alluded to it above, the Jet Card owners make a large percentage of the smaller jet fleets. This time last year was very busy, but it has been slow this year. I think any talk of recession and it may make a card owner think twice about that golf trip with the buds down to HXD.

I agree also that our Share owners will not be as affected by the whims of the economy. Our business in the months after 9/11 went roughly from 15 shares sold a month to over 30 a month.

I believe the Fractional model is set up well to ride out any storms.

 

[pilotyip]

Military not secure either

the majors.


I have a GREAT military flying job. The military pilot weathered the aftermath of 9-11 very well. Yeah we have been busier than a 1 legged man in an ass kicking contest since then, with the numerous deployments and all, but we have job security.

I had a great military flying job in 1975. Then Saigon fell, we downsized the military, pilots recruited and trained for the war suddenly found themselves riffed, moved to non-flying jobs, and non-promotable. Then in 1991 we had the "Peace Dividend" again riff, non-promotion and movement to non-flying billets followed. I bailed in 1977, got a flying job in the reserves. 18 months later I am getting letters from the Navy, sayin g they are short of pilots, would you like to come back. The gov't is a fickel employer, watch what happens if the "I will quit Iraq" candidate gets elected.