Article on NetJets & Bombardier

[jonjuan]

If these purchases are viewed as "replacements" and not "additional aircraft" for NJ, where are the owners of these shares going to come from. With the current state of the fractional industry, very few existing owners will be interested in buying shares in "new" aircraft and "new" fleets while the price of preowned shares are where they are (and very high inventory levels).

For example, why would I pay full price to be in a new Phenom 300 share and be in one of the first 20 aircraft. NJ will not have enough Phenoms to fly me, so they will probably fly me in the Encore or"upgrade" me to the XLS in the meantime. So for the first 2-3 years (of a 5 year term), I will be flying in the Encore or XL. And I would be able to buy a pre-owned Encore or XLS ahre for a fraction of the new Phenom price.

Once upon a time, there were very few, if any, preowned shares. The only way to get into the NJ program was to buy a new share. Those days are gone. With what most existing owners have seen (and been pitched), they will probably never buy a new share again. (For example, last year I needed more time, was exploring a card and other options, but was pitched a pre-owned XL share for between 1/5 and 1/6th (yes between 16% and 20%) of the price of a new share. I still ride in the same fleet. The sales staff spent a good bit of time educating owners on why pre-owned shares are a much better value than new shares (when they were trying to unload the former). Now try to unteach the owners. Selling brand new shares will be more difficult int he future.

Finally-you now get what I have been saying for some time. It's now becoming a commoditized space and actually Warren Buffet said regarding commoditized services, "you don't want to be the highest cost provider nor do you want to be the lowest cost provider."
Very, very few current or future owners will want to ever buy anything new, especially when they know their buddy flies on the same product and paid 1/2 what you did.
At the end of the day, orders, firm or otherwise, mean doodoo. If shares aren't purchased by owners, the provider won't take delivery.

 

[Tenspot]

Thus the need for completely different aircraft types. Nothing but new aircraft to offer.

 

[jonjuan]

Thus the need for completely different aircraft types. Nothing but new aircraft to offer.

Then the only option is significant shrinkage as alluded to by NJA owner.

 

[Tenspot]

I think shrinkage is inevitable in this shell game we call fractional flying.

 

[jonjuan]

I think shrinkage is inevitable in this shell game we call fractional flying.

What were you saying again? Good lord, mamma jamma.....them's breastises needs some likin....

 

[G4dude]

NJAOwner, maybe we are being a little too gloomy. Extrapolating a short term trend always results in significant error. The economy is growing again, and will grow more for the next few years, resulting in more share sales. Also, China and India loom in the windshield as a nice expanding market for what we do. I'm actually more optimistic about India's economy than China's.

 

[wolfpackpilot]

It seems like there are a lot of variables at play here. Personally I don't think the sky is falling just yet, but what the hell do I know.

Excellent points. Without knowing a single phrase in any of the Flex or NJA owner contracts, I am reserved to say anything. However, Flex owners will certainly have to see the "more-green" pasture to agree to sell or transfer their shares without a fight... one would think.

NetJets could just purchase Flex and operate it separately, but that begs my original question of why would they? We're in need of making money, not spending it.

Just my .02

 

[jetmaster727]

Bingo, this guy just broke the code!

 

[G200_PILOT]

NetJets could just purchase Flex and operate it separately, but that begs my original question of why would they? We're in need of making money, not spending it.

Just my .02

I'll bite...

When Sokol came in, one of the first things he questioned and did away with were the two separate operating centers we had with NJA and NJI. If he did that with two inter-company ops centers due to cost, what would make you think he'd keep the current Flex ops center?

This is all speculation of course. We're probably way off anyways...

 

[wolfpackpilot]

This is all speculation of course. We're probably way off anyways...

Oh.. I TOTALLY agree! I have NO FRIGGIN CLUE what is in the works.

My statement about separate operations was inline with NJA purchasing Flex, but the acft owners at Flex demanding to stay under their current contracts, thus forcing NJA (or any buyer for that matter) to operate it separately.