FlexJet Flies out of the red.

[Skytaxi]

I wonder if the other Frax can say the same!

http://www.canada.com/nationalpost/...=10b988d1-fc1c-4c67-9cea-81d4ad887a02&k=30985

 

[Guitar Guy]

Yes, at least one other frax can say the same about being profitable:

http://www.ainalerts.com/ainalerts/alerts/080806.html

NetJets Financial Winds Shift Favorably
The nine-month-old NetJets pilot contract, which raised wages substantially, isn’t having the speculated adverse effect on profits at the fractional provider. According to the second-quarter report released Friday by parent company Berkshire Hathaway, the flight services division–which includes FlightSafety and NetJets–posted a profit of $110 million in the second quarter and $131 million for the first six months, compared with $51 million for the second quarter and $58 million for the first six months of last year. Revenues from NetJets for the first six months increased $347 million, or 26 percent, over 2005, reflecting a 23-percent increase in flight operations and management service revenues and increased fractional aircraft sales. NetJets generated a pre-tax profit of $48 million for the second quarter and $29 million for the first six months, versus pre-tax losses of $1 million for the second quarter and $31 million for the first six months of last year.

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[On Your Six]

Here is the Flexjet article:
Sean Silcoff, Financial Post

Published: Monday, November 27, 2006
As Bombardier Inc. prepares to release third- quarter results on Wednesday, investors are looking for proof that the transportation giant can finally start to increase profits in its sluggish aerospace business.
Expectations are low. But within its aircraft division, the firm has begun to get help from an unlikely source.

For more than a decade, Bombardier has run its own airline -- a fleet of 85 Bombardier-made private jets owned in fractions by 635 corporations and wealthy individuals. It's been run at a loss but is about to start reporting its first profits. "We're in kind of uncharted territory," said Michael McQuay, president of Bombardier Aircraft Services, which oversees Flexjet, the fractional ownership program. "In the first 10 years of its existence my company made no money. Literally, [Flexjet] was a marketing arm for Bombardier to display the products. Now we're getting to the point where we're operating like a business. We are contributing to the parent company."
Don't expect Flexjet to turn the whole division around. Flexjet is barely in the black; Bombardier does not disclose its results, and Mr. McQuay, who is based in Dallas, said only that he is US$12-million ahead of plan for the year ending on Jan. 31. But if Flexjet doesn't cost money -- and draws customers to Bombardier's Learjet, Challenger and Global luxury jets -- aerospace head Pierre Beaudoin is happy.

Mr. McQuay said Flexjet will book close to US$420-million in revenue this year and US$600-million next year. Factoring out a bump in revenue resulting from a change in accounting rules, the business is growing by 15% per year, said Flexjet vice-president Sylvain Levesque. Since early 2005, Flexjet has stolen 60 customers from rival programs, losing none in return, Mr. McQuay said. That is due partly to the popularity of Bombardier's Challenger 300, a large-cabin jet that seats eight passengers. Flexjet has 24 in its fleet and will add seven next year.

Flexjet has hit a groove just as the industry begins to slow after years of double-digit gains. UBS estimates fractional ownership programs sold 1,278 shares in the first nine months of the year, up 6% from 2005. The number of planes in such programs rose eight-fold from 1996 to 2003 -- but is up just 13% since then, to around 900.The idea behind fractional ownership -- pioneered in 1986 by Rick Santulli, the founder of industry leader NetJets -- is that there are many potential users of business jets who can't afford, or don't need to own, a jet full-time. The programs sell shares of jets in increments as small as 1/16th. In exchange, they keep the planes housed, maintained, staffed and ready to go with as little as four to six hours notice. Each program is hence an unscheduled airline.

Buying part of a jet is not cheap. Flexjet's smallest plane is a Learjet 40XR, which lists for US$8.75-million. A 1/16th share sells for US$530,000. That buys 50 hours of flying per year for five years. (At the end of the term, the company buys back the share and sells the plane). There is also a management fee of US$6,575 per month and US$1,625 cost per hour flown. Fuel is extra.
Mr. Santulli's idea was that with enough customers, he could fly each plane 800 hours a year, wringing maximum return and use from the assets. His biggest fan is Warren Buffett -- a Netjets customer -- whose Berkshire Hathaway Inc. bought New Jersey-based NetJets in 1998.
But as the industry has matured, the results have disappointed. NetJets, with 48% market share (Raytheon's Flight Options and Flexjet have 24% and 11%, respectively) has lost money four of the last five years.

As it turns out, juggling the demands of all those part-owners is tricky. Fractional jets fly with no passengers more than 40% of the time, just to get to the right place for their pickups. Bombardier has gotten its "deadhead" rate down to 37% from 46% five years ago using schedule-optimizing software, and that's about as good as it will get, Mr. McQuay said.
Owners call in last-minute changes to their flight requests 30% of the time. During peak times or other instances when planes aren't available, the operator must charter planes from outside services to ensure customers have a jet waiting. NetJets lost US$80-million pre-tax in 2005 because of excess chartering.
Flexjet has come a long way since it was launched in 1995. At the time, Bombardier was having no luck selling planes to Netjets. Because NetJets was the biggest buyer of business jets -- it has 645 in its fleet -- it lowballed on price and demanded excessive guaranteed resale values from Bombardier.
"We tried to come up with something that would make sense, but we could never find a way to do it," said a senior Bombardier source who asked not to be identified. Flexjet officials were not available for comment.
But top management at Bombardier sensed fractional programs would take off, so the company established its own operation. Flexjet offered Bombardier the opportunity to sell to first-time customers, fill its production line and keep its maintenance and repair shops busy. And Flexjet's heavy flying schedule made the operation an ideal lab for working out bugs on new planes. "It was never going to be a home run or core to the business, but it was a useful extension," said another source familiar with Flexjet.
Flexjet didn't have any trouble selling shares -- it had 661 customers in 113 planes by early 2002. Making money, however, was a challenge. The company was overwhelmed by the complexity of running the operation.
So in 2001, it recruited Mr. McQuay, 57, who held several top-level positions during 25 years at Continental Airlines.

He put in place several measures to improve operations, service and reliability -- and save costs. He banished the smallest Learjets from Flexjet, because it was hard to make money with them; likewise, he stopped selling Bombardier's top-of-the-line jet, the Global Express, due to limited demand for part-shares of Bombardier's most expensive jet.

He slashed costs by imposing strict discipline on inventory. Flexjet would add a jet to its fleet only once all of its shares were sold, and made quick work of getting rid of planes once they came out of the Flexjet rotation (the fleet is continually upgraded; the average age of a Flexjet plane is 3.5 years old).
At one point, 20% of the fleet's shares were unsold; now, the rate is about 5%. Those efforts allowed Flexjet to get related costs down to $12-million a year from $79-million. The new software also saved Flexjet US$27-million per year as better planning resulted in the need for 20% less crew, 40% fewer planes and 5% less chartering.

In addition, Flexjet added several options, including "jet cards" entitling users to buy blocks of 25 hours of flying. Owners can also now sell unneeded hours to a "pool" from which other users can buy them. Still, the fact remains that Bombardier, the largest maker of business jets, does not sell to Netjets, the largest buyer -- unlike two of its largest competitors, Gulfstream and Dassault, which do not run fractional programs. And as Bombardier struggles to increase margins, some analysts wonder if it is worth keeping a low-margin operation that is not core to the plane-building business and may inhibit sales. "It is probably something that Bombardier really doesn't need to do," said Greg Pau, director of corporate ratings with Standard & Poor's in Toronto.

Despite breaking the profit barrier, Flexjet still has much prove: "I've got to be viable, and create a mechanism that supports the parent company," Mr. McQuay said. "They have to recognize that they're getting a return for their investment."

[email protected]

© National Post 2006​

 

[AeroBoy]

This seems to be an emerging trend from Flexjet: claim profitability, but don't provide the numbers to back it up. If you say something is true often enough, does it really become true? Someone ought to be asking Flexjet, "Where's the beef?"

Excerpt from July 2006 story on AINonline:

Meanwhile, Flexjet v-p of sales Bob Knebel told AIN that his company was operationally profitable last year, meaning that the monthly management fees and occupied hourly fees covered aircraft operations but not sales and general staff overhead. But Knebel said Flexjet achieved “net profitability” in the first quarter.

“What’s driving our profit is better efficiency–we have low outsource charter rates, we’ve improved our fleet optimization software, we have a young fleet and we have the highest sold-into-service ratio,” he said.

 

[NETFLIER]

whats driving the profits are the pilots that work for such low wages and the under the tyrants of the leadership. Plus they think the koolaid is great.

its unfortunate but true.

 

[FraxJockey]

Nevermind.

 

[Pacific]

whats driving the profits are the pilots that work for such low wages and the under the tyrants of the leadership. Plus they think the koolaid is great.

its unfortunate but true.

That's funny. The whole reason I went to work for Flex, and didn't even consider NetJets was that at the time, Flex paid better and had better benefits. That has since changed but does not mean that us here at Flex are not striving to improve our situation.
To make such a broad statement about an entire pilot group is ignorant.

 

[flexpilot]

Here's the short version. They are ten years old, have 85 planes and finally made a profit.

Here is the Flexjet article:
Sean Silcoff, Financial Post



For more than a decade, Bombardier has run its own airline -- a fleet of 85 Bombardier-made private jets owned in fractions by 635 corporations and wealthy individuals.

 

[rumrnr78]

Gosh aeroboy, how much more do you want? We are making money but our true mission is to sell whole shares (ownership) of Bombardier aircraft. Probably above your feable mind. Oh, and I got beef for ya, after a nice 401k match is a generous pension. Remember this when you are serving me my retirement toddies and I might leave you a tip other than my dirty diaper, ha,ha. Cheers, Rum

 

[AeroBoy]

rumrnr78,

Please stay off the sauce before posting -- I never asked about your 401k matching or retirement plan. Also, don't forget that Enron had a generous retirement plan backed up by its stock, and we all know how that one turned out. So don't count your chickens (or in this case, pension) before they hatch. My point was this:

Over the last three years, Flexjet has been claiming it has been profitable. So is the latest story that they're profitable correct, or the any of the ones published over the past three years? They can't all be correct, as the latest story says the company has finally become profitable (not in the past tense, but present tense). This was my point by posting the AIN story from earlier this year.


Also, what constitutes profitability? Note the reference to AIN story that says it was "operationally" profitable. Include sales and general overhead, and, poof, they're no longer profitable. Even then as now, Flexjet has not provided any publicly released financial numbers to show it really is profitable this time. And the Bombardier filings do not break out Flexjet from the balance sheet, so who really knows if Flex is profitable. If Flexjet has claimed profitability in the past but was just bluffing, then how do we know the company is not bluffing again? The answer is that we don't. Take that to the bank...or not.