Amex, NetJets, and Johnny Soprano.

[gunfyter]

If they do ... we will be waiting till 2016 for those raises. A wise man on another board said The company will not be opening negotiations unless they are looking for concessions. Otherwise they will just take the option and extend the contract 3 more years. This makes sense to me...

 

[mtnrunner]

They absolutely did post losses on those airplanes in 2009, along with repurchasing. In fact DLS went even deeper to close 2009. That's where nearly all of the $700mill plus in 2009 losses came from per Buffett and Berkshire in the 2009 letter and financials.

A plane value can take a write-down to $3mill with a loss of X. Then later post a profit if it's sold for $4.5mill. Or if the market justifies backing out the write-down because of a market recovery. That's accounting, not generating reoccurring cash-flows.

Pilots want positive cash-flows from a net gain in new sales, monthly management, and flying. The rest is for the accounting department. Anything else is bad from a pilot perspective.

I bet you can increase your earnings if you sold all your cars. Then what? They are just selling the cars in the driveway. New planes please! More new planes added faster than old ones are going out the back door pretty please!!

 

[BentOver]

More new planes added faster than old ones are going out the back door pretty please!!

We can all agree with this....

You may know more than most.. But what was the delivery time frame for all those Cessna's and 4000's etc.. I was under the impression that most, if not all, new deliveries were slated for 2011 and beyond.. And the Falcon's weren't scheduled until 2014....

The way I'm looking at it is if the majority of deliveries weren't slated until 2011, then NJA simply took a year or two delivery delay... (and IMO not all that irresposible given the state of NJA and the industry)

 

[gunfyter]

The losses were MARK TO MARKET write downs on the value of the purchased planes. We spent way more than $700 Million buying back those planes. If we had written off what we paid for the airplanes it would have been about $1.5 billion. Aircraft values plunged by 40%... 40% of 1.5 Billion is $600 million. If the value of airplanes had remained stable ... there would have been no losses reported.

When you bought your house in 2007 for $400K ... you did not lose $400K. But when the housing bubble burst and the value of your home is now only $200k ... you are now $200K poorer. If you were a business you are required to write down the value of this asset. mark to mark accounting rules. the shareholders must be made aware of this loss of value.

NetJets produced a pre-tax loss in 2009 of $711 million compared to pre-tax earnings of $213 million in 2008. The pre-tax
loss at NetJets in 2009 included asset writedowns and other downsizing costs of $676 million compared to $54 million of such
charges in 2008.

What you see here is even in the terrible terrible year 2009 ... Excluding the write down losses ... we only lost $35 Million. Now that we do not have those Write down losses ... how hard it is believe we made $200 million? With 1000 fewer employees we probably have $100 to $200 Million less in Payroll and associated costs. as you know, that is not the only place we have seen cost cutting.
++++++++++++++++++++++++++++++++++++++
AliceSchroeder.com

Nearly 90% of NetJets losses

Nearly 90% of NetJets losses were one time aircraft value mark to market write-downs for 2009. Sokol accelerated and exaggerated losses to "Santulli's report card" so he could show greater "profits" for 2010 and Sokol's report card. Remove all the one time charges (restructuring costs, write-downs, etc) resulting from a financial crisis and major economic down turn and the "turn-around" you speak of is the tail wagging the dog.

see : Mark-to-Market Accounting Basics

 

[mtnrunner]

Customer Cutting vs Cost Cutting

Sales Revenues - fair to say down more than 30%
Sales Margins - fair to say less than 4% on reselling used aircraft. But when the company repurchases at FMV and resells at FMV margins should be nill.

Monthly Management Fees - fair to say more than 30% of shares have left the program or more than 150 aircraft. Add the crew and Mx cost increase due to seniority/longevity and aging fleet respectively. Therefore, MMF revenues decreasing and the two biggest ticket fixed line item expenses increasing.

Hourly Fees - fair to say "operational efficiency" isn't at an all time high. In fact it's trending the historical low range. With Utility in the low range there is little OHF margin. Data indicates revenue flight hours year over year are down more than 10%. And down more than 25% from its peaks.

Every revenue stream with the exception of sales from disposal is down equal to or greater than cost cutting. If my revenue is down as much as 30% from peak but I've cut 10% to 15% of my staff my margins get worse, not better, when you use a revenue to staffing level metric.

If I ran at 75% utility but now run at 65% utility my operational efficiencies got worse not better. Therefore, my margins are worse not better.

Name one metric that has improved under DLS/JH management? Just one.
Employees per sold airplane - no
Utility - no
Aircraft availability - no
Net new sales - no
Fewer owners per sold airplane - no
Larger plane size per owner - no
Larger plane size per employee - no
Higher sales margin per sold airplane - no
Decreased number of unsold airplanes to maintain without owners - sort of

I have one - disposals - they are good at trading in old planes for a maybe on future orders.

So when you say cost cutting is paying off, I ask, compared to what? Good at cost cutting would mean when 30% of my business leaves I have found a way to reduce 35% to 40% of my staffing.

We are all glad they suck at that. They aren't even down 20% on staffing.

But they did hit all the non-union employees on pay and benefits for a small "gain" to put towards the $227mill. And you know the owners are happy to hear they pay more for less so Berkshire can post a $227mill profit.

It's all just silly. Why say anything at all if you don't have to?

My 2cents anyway. I'm done. Just enjoying the annual letter release day. Rah - Rah - Rah Warren! You should have left while on top. Not while trying to write your own obituary.

Again, just enjoy the ride...

 

[BentOver]

We all know sales and the business is not what it was in 2007 or even 2008.... Neither is the entire country.. As much as I want a recall, I am ok with the fact that business is just not picking up as quick as they would have liked.......

And the books can be cooked any which way that Warren needs.. It's the same with every quarterly report from every business...No suprise that NJA's books can look fishy at times..

But I haven't seen one thing that has occurred that wasn't announced prior..

1)Shrinkage...announced

2)Aircraft orders cancelled...excuse ...given

3)Recalls.. Weren't slated to begin until mid 2012 at the earliest

4) crappy 2011....forecasted by sokol himself on CNBC... the idiot humself said,, "we see a difficult 2011"

But you have to also look at the positives to see some re-investing in the company....

1) New HQ
2)New a/c orders...appearing to atleast start arriving on time.. Unless you believe 1000 Bomb. employees would be duped into christining a Global 6000 that wasn't really a NJA plane.

3) Joint venture with Signature for elaborate PBI/VNY FBO's
4) In house Financing for corporate buyers
5) Wifi
5)Refurbs..(although I know they may be sprucing up the chickens for a sale)
6) Heck, they even brought back the more expensive Fiji water
7) Have not said one word about pay cuts or cried poor asking for any concessions other than scope.. (which is a big concession, but as far as pay and bennies, still very much intact)
8)Furloughs due to shrinkage that is supposed to happen....rumor has been absolutely debunked time and time again. As far as I know, everyone except the original 495 has kept their jobs for 2+ years with no furlough on the horizon.


With this huge loss of a/c that you and Luthi predict, I want to know when this furlough is going to happen... I mean if they're gonna dispose of 75 more a/c, you'd think they'd need 350+ less pilots

 

[mtnrunner]

All I have to say is they may want to be a little less obvious and sell some new planes. Not by 1's, 2's, or 10's but by 50's and 100's. Just an intellectual honesty thing. Other than that I don't care all that much. It all tends to work itself out eventually.

The way I look at it none of this matters to the over 55 or seniority higher than 1,500 crowd. At least not for 5 to 10 years. By then the landscape and players will be different.

 

[gunfyter]

I have to agree, there is no really good news here for people that want a recall or upgrade. Its a little good if you don't want to be furloughed.

I believe we have reported profits 9 out of the last 10 years. They can't lie every year.

Its not too hard for me to believe there are profits. We charge $10,400 per hour to ride on a Citation X. The 4% the company says they take is a measily $400.

 

[mtnrunner]

Can't disagree with that. 3% to 4%? Nearly all agree it's a less than ideal investment with high risk and a lot of energy for very low returns. Most look for 15% to 20% pretax. But some people much like WEB enjoy jets more than sex. The issue going forward is reinvestment and scale - do they reinvest, take all they can out and let it fizzle fast - or somewhere in between?

The next CEO of Berkshire will answer the NetJets beyond 5 to 10 years question. For now JH is there and he, like DLS, wasn't hired to inspire or make any friends. The good news is most of us already have enough friends, so we'll see what he's got.

 

[gunfyter]

My understanding is the 4% is on revenue, not on investment. I tried to illustrate that by comparing to Amex's 3 %. And Johnny sopranos 10 % vig.

I don't know how much Buffett is into NJ for. $1 billion? Then $200million is a 20% return. $2billion, a 10% roi.

I don't think it's more than $2 billion. If its more than that $200 million a year profit is not going to cut it... Understanding this all depends on my assumption that the annual report is telling the truth, which is questioned by some here.

 

[mtnrunner]

Even Buffett's letter focuses on share price to BV (not profit!).
What is NetJets overall contribution to BRK's BV (not profit!)?
Next time you are in CMH ask what's NetJets Free Cash-Flow? What's NetJets BV? What is the Owner's Equity?

That's where you find a company's real value. Not, absolutely not, in a posted "pre-tax earnings" aka "gross profit." That's investment banking 101.

That's said, generally a profit is better than a loss. It's a positive. At least there is enough slop to post a profit. A turn-around? Ha! I submit the reach or desperation to post these silly numbers comes at the expense of investment for growth on long-term benefit.

In my opinion DLS hurt BV and the long-term to accelerate short-term results (profit). I believe the DLS/JH plan continues to hurt BV and the long-term to accelerate short-term results (profit).

Just one man's opinion. Where we don't agree we can agree to disagree. Only wishing everyone the best and enjoying a bit of the intellectual discussion. Would I call it a turn around? Nope, the brand is no better off in fact its a weaker brand (still strong but much weaker): this is just shrinkage and a little squeeze.

Cheers! :beer:

 

[gunfyter]

I don't find that we disagree much. I think they have found a way to generate profits... For their reports in cash or other methods. But that doesn't mean growth, recalls or upgrades for us. It just means we won't be shutting the doors any time soon. If they were reporting losses I would be much more nervous.

Taking everything into account, $227 million in profit is good news. Especially if you are in the top 1500 and 55 as you suggested. There is a reasonable chance I may be able to work at the same company until 65. So the news is a bit better for me than for some others, but this was about the best news I think anyone could have hoped for or expected given what we know about retention and sales. I won't expect better news until I see new hardware in the barn and increased fractional sales.

My biggest concern is Scope. I don't care if we make profits or get new planes if we aren't doing the flying.

 

[BentOver]

I'm pretty sure the second or third richest man in the WORLD really doesn't care what any one else thinks:beer: about his accounting matrix or that some people think he is mismanaging his managers.

 

[gunfyter]

Criticizing the staff cuts, Jacobs points out that most of the $711 million loss in 2009 was a noncash charge and says the company was headed toward being about $70 million cash-flow positive in 2010 even if the company didn't sell another new fractional share

http://www.netjets.com/Learn_More/Press_Releases/2010/pr2010_07_30.asp

Here is Jacobs, saying even without any cost cutting measures NetJets was to be $70 million cash flow positive in 2010. Even without selling ANY fractional shares!

Buffett says. "It looks like NetJets will earn $200 million pretax this year. It's as remarkable a managerial achievement as I have ever seen. When aviation picks up, it could be a company that could earn $500 million a year."

I hate to be non-negative :bawling:. But this looks like a money maker to me. I want a raise.

 

[platinum750]

if you believe that garbage you are a fool. Buffet is not going to say anything negative now. Netjets does not make money.

 

[gunfyter]

The Crazy Fool

I have a funny way of believing official reports from people who are accountable to the scrutiny of shareholders, and the Federal Trade Commission...

and being skeptical of claims to the contrary from those who provide no evidence to back up said claims... and subject to absolutely no scrutiny or accountability.

 

[BentOver]

I have a funny way of believing official reports from people who are accountable to the scrutiny of shareholders, and the Federal Trade Commission...

and being skeptical of claims to the contrary from those who provide no evidence to back up said claims... and subject to absolutely no scrutiny or accountability.

To add to that..... After the Sokol affair I'm fairly certain he's going to be extra diligent with how Netjets is handled and what gets reported...

It's funny how whenever a company posts their financials there are those who always call BS..always.... It's a wonder any company makes money..

On a final note, what has been missing from the Netjets portion of the reports over the last few quarters??..... "Netjets owns more aircraft than it needs...." It was there last year and in late 2009, and now it hasn't been on the report in a few quarters now...coincidence????

 

[gret]

To add to that..... After the Sokol affair I'm fairly certain he's going to be extra diligent with how Netjets is handled and what gets reported...

It's funny how whenever a company posts their financials there are those who always call BS..always.... It's a wonder any company makes money..

On a final note, what has been missing from the Netjets portion of the reports over the last few quarters??..... "Netjets owns more aircraft than it needs...." It was there last year and in late 2009, and now it hasn't been on the report in a few quarters now...coincidence????

In honor of Davey Jones...I'm a Believer!

I've been a skeptic and now say you have to take the figures at their face. A quarter or two you can get by with, but not two years...don't think so.

Still perplexed how you can make money with sales and flight activity declining so much and everyone else losing their shirts. Something may come back and bite them in the butt in the future, but not likely due to reported figures being wrong.

A National NetJet's Management Day should take place as they have done something that nobody else has in this recession.

 

[gunfyter]

Gret ...

Its not just two years... we reported profits in about 9 out of last 10 I believe.

I believe its because of the Larger fleets. I think XL and smaller are money losers. But brings people into the system. But that's what most of the others are flying. Exception XOJet and Flexjets. But XO does not charge enough....

 

[gret]

I went back awhile ago and looked up the 10-K filings. NetJets made money in 2011, 2010, 2008, 2006, 2004 and operated at a loss in 2009, 2005, 2003, 2002, & 2001. 2007 numbers weren't broken out, but I believe, based on the narrative, they made money.