Bombardier to sell 120 planes to NETJETS???

[ArtVandalay]

DUATS, Artvandalay, you guys mind connecting the dots for me...I'm not arguing here just wondering what makes you guys believe this order is a huge blow for flexjet?

Why is this NJA bombardier order so "bad"?? comments like " flexjets guys work on our resumes", "Flexjet has managment but no leaders" "no chance for flexjet recalls", etc.. i find it hard to believe that an external affair can have so much impact on internal matters at flexjet... Would you guys be singing the same song had Sokol ordered more Gulfstreams or Falcons???

As far as NJA buying Flexjet- I'm about to start my 7th year at Netjets. I have not heard anything about "Netjets buying Flexjet". With 495 pilots on furlough I doubt Sokol wants to stir that pot by adding a few hundred more, and 3 more fleet types.

It's a blow because we are, were, the only fractional that flew our own products. I exclude xo jet because they are not really a frac but more of a charter broker. It's also a big blow because this could just be the tip of the iceberg. When your parent company ignores its own employees and goes for gold instead of integrity, it blows. Flexjet clearly does not have the sales team in place to sell large cabin aircraft, and Bombardier validated that buy selling to NJ. Flexjet is all about the status quo, if it aint broke don't fix it mentality. Flexjet seems to treat profit like a prescription; if you make profit then, repeat as necessary. In other words, they don't want to innovate or make changes that might affect the profit. They are the most conservative company I've ever worked for. There is no desire to be aggressive when you're making profits, that is the way they view it. Maybe there is nothing wrong with that but, from a business perspective, you can't survive if you don't grow, that is a fact.

 

[av8trinabarrel]

It's a blow because we are, were, the only fractional that flew our own products. I exclude xo jet because they are not really a frac but more of a charter broker. It's also a big blow because this could just be the tip of the iceberg. When your parent company ignores its own employees and goes for gold instead of integrity, it blows. Flexjet clearly does not have the sales team in place to sell large cabin aircraft, and Bombardier validated that buy selling to NJ. Flexjet is all about the status quo, if it aint broke don't fix it mentality. Flexjet seems to treat profit like a prescription; if you make profit then, repeat as necessary. In other words, they don't want to innovate or make changes that might affect the profit. They are the most conservative company I've ever worked for. There is no desire to be aggressive when you're making profits, that is the way they view it. Maybe there is nothing wrong with that but, from a business perspective, you can't survive if you don't grow, that is a fact.

Tell the no growth no survival thing to Sokol. NJ wont be growing for a LONG LONG time. I feel your no growth, no direction, no leadership pain all too well.

When I came to NJ three years ago, it seemed that every airline was heading down this exact path. No way in hell I wanted a major airline gig. My fellow furloughed brothers and sisters have been forced to turn to these type of op's to feed the family. I hold out little hope for me returning to NJ and I pray for you and everyone else being kicked in the groin by management. If it makes you feel better, I just installed a 75 gallon water heater and augered out a toilet that had 3 month old floaters in it. My take was $750.00. Somebody that is gonna let a turd sit in a toilet for 3 months is gonna take it in the rear worse than Sokol and your guy can dish out!:nuts:

 

[ArtVandalay]

I guess it really just boils down to a simple choice. Do you dig in or chase something else?? Problem is, with fractionals, there isn't enough history to know what the future will bring. With the airlines, its all cyclical and always will be so, if you get in at the beginning of a good cycle, you're set. With the fracs, its a crap shoot right now, do you stay and protect your seniority and longevity or do you bail for "greener pastures"?

To quote: "Get busy living, or get busy dying".

 

[FastJP4]

I guess it really just boils down to a simple choice. Do you dig in or chase something else?? Problem is, with fractionals, there isn't enough history to know what the future will bring. With the airlines, its all cyclical and always will be so, if you get in at the beginning of a good cycle, you're set. With the fracs, its a crap shoot right now, do you stay and protect your seniority and longevity or do you bail for "greener pastures"?

To quote: "Get busy living, or get busy dying".

Tough call, but I can say this. When I was furloughed from Flex I was pretty bummed out. As it sits now, I'm very thankful I was furloughed. I now work overseas and was just typed on the family's new aircraft - a 2011 Falcon 2000LX. Not a huge fan of the 30/30 schedule, but I can't complain with working half a year. Pay is better than a 15 yr Challenger pilot, and the respect given to us exceeds anything I've ever experienced working in the US.

It's always a tough choice to decide whether to dig in or seek other opportunities, but I can honestly say being furloughed from Flex was the best thing that's happened to me in my flying career. Flex and its pilots have a very bleak future with FG at the helm.

 

[X-rated]

But the public who will buy these shares in a heavy jet want Gulfstream. .

Yup, right up till the first time they actually actually sit in a Global. The XRS has a 28 percent larger cabin than a G550. (2140 cu ft vs 1669 cu ft) Likewise, the 7000 will have a 23.3% larger cabin than the G650. (2637 vs 2138 cu ft)

Just sayin'...

 

[jonjuan]

Yup, right up till the first time they actually actually sit in a Global. The XRS has a 28 percent larger cabin than a G550. (2140 cu ft vs 1669 cu ft) Likewise, the 7000 will have a 23.3% larger cabin than the G650. (2637 vs 2138 cu ft)

Just sayin'...

Yep-Ol' Warren flew in Bill Gates' Global last year and fell in love. Game over.

 

[DUATS]

It's a blow because we are, were, the only fractional that flew our own products. I exclude xo jet because they are not really a frac but more of a charter broker. It's also a big blow because this could just be the tip of the iceberg. When your parent company ignores its own employees and goes for gold instead of integrity, it blows. Flexjet clearly does not have the sales team in place to sell large cabin aircraft, and Bombardier validated that buy selling to NJ. Flexjet is all about the status quo, if it aint broke don't fix it mentality. Flexjet seems to treat profit like a prescription; if you make profit then, repeat as necessary. In other words, they don't want to innovate or make changes that might affect the profit. They are the most conservative company I've ever worked for. There is no desire to be aggressive when you're making profits, that is the way they view it. Maybe there is nothing wrong with that but, from a business perspective, you can't survive if you don't grow, that is a fact.

What he said....

Bottom line: the only thing that separated Flexjet from other fractionals was the exclusive relationship with Bombardier. Since that is now gone, I think the barn door is open and Flexjet will get sucked up by netJets or someone else. If Netjets, I am sure the Lear 60 would disappear - and the 604/605 might as well. The 40/45 and the 300 are the bulk of Flexjet's contracts - and the most valuable assets to another company.

 

[jtf]

But are they really valuable assets? Are those contracts making a profit? Most, if not all the real profits for the fractionals have been in sales while operations have mostly been money losers. It has taken all kinds of squeezing for NJA to supposedly make a profit on operations last year (not sure if it was really on ops or if it was really mostly in cost cutting). NetJets is more expensive for the customers and probably runs more expensive on its operations so buying another fractional (the contracts) would be an instant loss. With 70 percent of the the entire fractional market it really isn't necessary for NJA to buy anyone out there out at the current time. It makes more sense for NJA to wait out the competition and grab customers when the competition shrinks or dies. I guess I could understand an acquisition if one of the competitors started really picking up market share, but that isn't happening right now. Honestly, I don't see buying any of the fractionals as a wise business decision for any company.

 

[DUATS]

But are they really valuable assets? Are those contracts making a profit? Most, if not all the real profits for the fractionals have been in sales while operations have mostly been money losers. It has taken all kinds of squeezing for NJA to supposedly make a profit on operations last year (not sure if it was really on ops or if it was really mostly in cost cutting). NetJets is more expensive for the customers and probably runs more expensive on its operations so buying another fractional (the contracts) would be an instant loss. With 70 percent of the the entire fractional market it really isn't necessary for NJA to buy anyone out there out at the current time. It makes more sense for NJA to wait out the competition and grab customers when the competition shrinks or dies. I guess I could understand an acquisition if one of the competitors started really picking up market share, but that isn't happening right now. Honestly, I don't see buying any of the fractionals as a wise business decision for any company.

Problem for profitability is too many core aircraft - a polite name for the stuff the sales department has not found a buyer for. If you were to merge two fractional operators - at least one of which doesn't have a union contract - you could eliminate the excess core in a heartbeat.

Scenario: NetJets buys all the contracts Flexjet has, and the CL30's and 45's. They don't buy any 60's or 604/605's; those owners are moved into core airplanes already at NetJets. Excess Flexjet pilots are either furoughed prior to the deal or stapled to the bottom of the NetJets recall list, which I think extends to about 2019. Core fleet gone, new contracts in place, staffing managed, profitability increased.
I'm not a professional M&A guy - but I did stay at a Holiday Inn Express last night.

 

[T-1GUY]

Just a question thinking out loud. Why would Netjets need to purchase Flexjet ? Could they not just have an agreement that says Netjets will buy aircraft form Bombardier, and in return, Flexjet will be shutdown, customers will become Netjet customers ? I wouldn't want a merger. Those things are big headaches. I just want a good deal on jets, and you in return, stop competing with me. Somewhere in the middle, the customers get a good deal and become NJ owners in shiny new airplanes...

 

[Willy21]

I hope you are not right DUATS. The last thing we need in this industry is more experience hitting the street.

 

[CALRepublic]

Scenario: NetJets buys all the contracts Flexjet has, and the CL30's and 45's. They don't buy any 60's or 604/605's; those owners are moved into core airplanes already at NetJets. Excess Flexjet pilots are either furoughed prior to the deal or stapled to the bottom of the NetJets recall list, which I think extends to about 2019. Core fleet gone, new contracts in place, staffing managed, profitability increased.
I'm not a professional M&A guy - but I did stay at a Holiday Inn Express last night.

oh boy, here we go, the "staple" talk...

 

[OPECJet]

oh boy, here we go, the "staple" talk...

McCaskill - Bond.....

No one would be stapled, but you might see extra furloughs. NJA recall rights and $1.25 will buy you a 20 oz. Coke.

 

[DUATS]

McCaskill - Bond.....

No one would be stapled, but you might see extra furloughs. NJA recall rights and $1.25 will buy you a 20 oz. Coke.

With Flexjet recall rights, you need $1.50 for the Coke.

 

[DUATS]

I hope you are not right DUATS. The last thing we need in this industry is more experience hitting the street.

Me too. Just trying to read the tea leaves.

Oh, and I apologize for the word "stapled". I am sure the union brothers and sisters at NetJets would negotiate a fair integration.

 

[Jack Campbell]

Me too. Just trying to read the tea leaves.

Oh, and I apologize for the word "stapled". I am sure the union brothers and sisters at NetJets would negotiate a fair integration.

Whether you're being sarcastic or not, as a NJ furloughee, I'm sure there would not be a staple. Still, aren't we all getting a bit ahead of ourselves talking about a NJ-Flex merger? NJ has been operating worldwide for a long time and talking about China for years and Flex is not in the long haul business.

 

[ArtVandalay]

http://ibt1108.org/Docs/Teamsters%20Local%201108%20Authorization%20Card.pdf

 

[RJ Bum]

Bombardier’s NetJets Order: Bigger issues at play involving NetJets & Bombardier

Bombardier’s NetJets Order: Bigger issues at play involving NetJets & Bombardier
Monday, March 07, 2011

* Analysis by: GLG Expert Contributor
* Source: http://www.glgroup.com

Summary:
While the landmark order for the Global Express family of aircraft by NetJets can viewed from a product perspective (as Bombardier trumping Gulfstream) there are more important strategic considerations at play for both the Canadian airframer and the industry’s largest fractional ownership program.

Analysis:
Last week’s $2.8 billion dollar deal (potentially worth as much as $6.7 billion if all the options are exercised) was a major coup for Bombardier. Industry watchers were quick to comment about how Bombardier outflanked Gulfstream for this order. But this is less about Bombardier versus Gulfstream and more about how Bombardier’s product strategy lined up with NetJets' long term plan.

NetJets’ long term plan and Bombardier’s product line strategy
Let’s start with NetJets. Every turnaround strategy has two critical elements to it. The first is addressing the company’s cost component. NetJets’ new CEO David Sokol cancelled orders for new planes, laid-off staff, furloughed pilots, sold off ageing aircraft and reduced its serviceable debt by $600 million. Sokol also did away with some sacred cows like free trips on NetJets aircraft for celebrities and expensive junkets like their annual Las Vegas Poker Tournament for their high-end customers. As a result, Sokol managed to take NetJets from a $711 million dollar loss in 2009 to a pre-tax profit of $207 million in 2010.

The other critical element of NetJets’ long term plan is to address the growth component; and it’s here where Bombardier lined up better than Gulfstream, not because the new Global Express family was better than the G650, but because Bombardier has better midsize and super midsize offerings it could eventually provide NetJets….platforms the fractional provider needs to bridge the gap between the Phenom 300 and the G5000. A decision on mid range aircraft is expected to take place as early as this fall. At the risk of reading too much into a press release, Sokol’s comments on the Global deal centered around being “impressed with Bombardier’s product strategy vision.” But it would be a safe assumption that Bombardier provided Sokol a detailed look into their product strategy and he probably liked what he saw. In fact, he may have even had a few suggestions himself for Bombardier that centered on reliability and performance. And what better platforms could there be than the L85 or the expected upgraded CL300, arguably the best aircraft for fractional operations. Indeed, no one should consider it happenstance that NetJets has chosen suppliers such as Embraer and Bombardier, two airframers that know a little something about the adhering to the rigors of commercial airline operations. The CL300 in particular was built with the fractional model in mind i.e. a simple, high utilization, reliable aircraft with great ramp appeal. For NetJets, having one supplier over four (4) key segments (5 if you count Embraer’s Phenom 300s) could translate into significant discounts in the front-end purchase price for the aircraft as well as life cycle support and training costs. Even with Gulfstream expected to come out with their new large and super large family of aircraft fairly soon, competitive midsize and super midsize aircraft is something they simply do not have in the G150 and G250. In fact, in terms of NetJets correcting their disjointed fleet, Gulfstream, Dassault and Cessna essentially fell victim to NetJets’ shift from its old entrepreneurial culture to a more rational and deliberate long term planning philosophy.

The sizzle in the deal
The centerpiece of Sokol’s growth plan is tapping emerging international markets like China and India. This is where new demand will come from both in terms of customers and destinations. The Global Express deal will provide NetJets with the products, but how could they start mining these markets for customers? Capturing customers in these markets requires a demand vehicle and it seems that NetJets is looking to do it, in part, by securing premium commercial airline customers i.e. first class and business class flyers. The idea is to partner with airlines and offer their premium customers continued service on post hub travel using fractional ownership. Interestingly, Lufthansa Private Jets recently announced that they were closing down their Swiss Private Aviation subsidiary and returning back to the NetJets fold using a previous agreement the two companies had for block charter. (Korean Airlines currently has a similar deal with Flexjet). A logical extension of this strategy could be dusting off Bombardier’s Global Connector program which calls for Globals to be outfitted with 12 to 19 seats in commercial airline livery charging premium price fares and operated by NetJets. On the commercial airline side, they would be happy to lend their branding and hand over operational control of this service to NetJets in return for a sizeable share of the profits.

The future of Flexjet?
As for Flexjet, the NetJets order for Globals (and the prospect of a follow-on order from Bombardier a very real likelihood) does not look bode well for their future. It begs the question: what benefit would Bombardier have in sustaining Flexjet if they’re selling aircraft to other fractional providers? The answer is not much. Furthermore, if NetJets, the industry’s largest fractional provider was losing money from operations, it’s a safe bet to assume that Flexjet is not a major contributor to Bombardier Aerospace’s earnings whose current EBIT margin is mired at 5%. Flexjet also never lived up to the promise of migrating fickle fractional customers into traditional aircraft buyers (but to be fair, no fractional ownership provider did, including NetJets). It is therefore well within the realm of possibilities that a potential NetJets mid range aircraft order from Bombardier for L85s and CL300 could have Flexjet as a throw-in.

Conclusion
With Bombardier finally succumbing to the allure of selling to NetJets, the prospect of divesting or shuttering FlexJet is something Bombardier should consider. The margins from the current and potential NetJets orders (even if they are slim they are still incremental i.e. these are margins Bombardier would not have otherwise realized) coupled with the shedding of the costs of sustaining Flexjet will add significant margin to their bottom line. Throw in ceasing production of the poor selling L40XR and L45XR programs and marginal success for the C-Series and perhaps Bombardier finally realizes its long cherished goal of achieving an EBIT margin of 10 to 15% for its Aerospace Group, returning the stock back to when it was a critical holding of any major investment fund portfolio.

As for NetJets, their current long range plan is bold, to be sure. But let’s recap what Mr. Sokol has actually put in play. First, with last week’s Global order he’s procured a family of aircraft that is perfectly suited to capture demand in emerging markets becoming the only fractional provider with a truly international footprint. Furthermore, in dealing with Bombardier, NetJets could possibly have taken out a competitor in Flexjet as well (either by way of eventual acquisition or forced retirement). Domestically, in addition to streamlining operations, Sokol procured the same light aircraft model as the competition. Some fractional competitors boasted how NetJets “copied” them by selecting the Phenom 300 after they did. This should be a cause of concern rather than a badge of honor. If I’m a fractional prospect in the US that’s looking to buy into a Phenom 300 share, why would I opt to go with the #3 or #4 fractional provider over NetJets?

Sokol’s plan is more than a turnaround strategy for NetJets. It may actually be a prescription for the fractional business model. It’s going to test the basic tenets of the fractional industry such as operational efficiency, network coverage and the migration of concept buyers to whole aircraft sales. The only problem is that in Mr. Sokol’s world, there can only be one fractional ownership provider. The remaining fractional programs would do well to take notice that NetJets is gunning for their customers and surrender may be their only option.
Relevant Subject(s):
Aerospace & Defense

© 2011 Gerson Lehrman Group. All Rights Reserved.​

 

[LAZYB]

Whether you're being sarcastic or not, as a NJ furloughee, I'm sure there would not be a staple. Still, aren't we all getting a bit ahead of ourselves talking about a NJ-Flex merger? NJ has been operating worldwide for a long time and talking about China for years and Flex is not in the long haul business.

DOH integration would bite the big one. Left Flex for NJA. Guys in my new-hire class @ Flex would be ahead of me at NJA... :angryfire

I'd be looking for my postal uniform.

 

[ultrarunner]

I think NJ will evenutally buy FJ, and the key question will be "What 85 pilots?"

You meant to say "what 460 pilots". NJA has more Pilots on furlough than FLEX has even flying the line. And the former are covered under a CBA. Any purchase of Flex will be for it's customer base and maybe some airframes.