fractional future

[dogg]

Wondering about how you guys that work fractional flying see the future of the business. From the outside it looks like the business model is coming apart. It seemed like a couple years ago that everyone wanted to be there and now it sounds like life is tough and the future of most if not all fractionals are seriously in doubt.

 

[bartpearl]

Wondering about how you guys that work fractional flying see the future of the business. From the outside it looks like the business model is coming apart. It seemed like a couple years ago that everyone wanted to be there and now it sounds like life is tough and the future of most if not all fractionals are seriously in doubt.

I've been in it for 7.5 years, and I wouldn't say it's "coming apart"; however, the industry is in the middle of a transition. The following is just my humble opinion, I'm sure others may see it a different way.

Netjets (and fractional ownership in general) took off on a rapid growth spurt in the mid-90's. For about a 7-8 year period, it essentially operated as a pyramid scheme....i.e. the sale of a share today financed the loss of operating the share that was sold yesterday. Senior management gave little or no thought to making the operations efficient, and their planning horizon was about 3 weeks in the future. In short, senior management did not do their job in planning for the future. The end of rapid growth was inevitable, but they seemed to ignore that.

When the growth curve leveled off in 2001/2002, the operational costs started to eat their lunch. This started a major shakeup/reorganization that has seen virtually a 100% change in operations management. The new crew inherited a mess, many good things have been done to fix the problems, but many, many things remain to be done.

Fractional ownership as an industry is here to stay. In some respects, it may have been oversold, and it's continued growth may slow down or even level off completely; but I doubt it will go away. I couldn't say what the future at the other fractionals looks like, but as far as Netjets goes, I think it's long term future is directly related to how long Berkshire Hathaway is willing to wait for it to become consistently profitable, and how small a return on their investment they are willing to accept.

 

[gunfyter]

I think that is a good answer from a man who uses his real name.

 

[rajflyboy]

I agree with Mr. Pearl

 

[dogg]

Netjets (and fractional ownership in general) took off on a rapid growth spurt in the mid-90's. For about a 7-8 year period, it essentially operated as a pyramid scheme....i.e. the sale of a share today financed the loss of operating the share that was sold yesterday. Senior management gave little or no thought to making the operations efficient, and their planning horizon was about 3 weeks in the future. In short, senior management did not do their job in planning for the future. The end of rapid growth was inevitable, but they seemed to ignore that.

I couldn't say what the future at the other fractionals looks like, but as far as Netjets goes, I think it's long term future is directly related to how long Berkshire Hathaway is willing to wait for it to become consistently profitable, and how small a return on their investment they are willing to accept.

So in essence, the cost of operating is not covered by the hourly rate charged to the customers.....It seems like eventually NetJets would have to become more like a charter airline and the cost to the customers would have to go up quite a bit. And maybe go to two aircraft types to reduce training and maintenance. Sure hope that you guys pull through-I have a couple of good friends who are hoping to make a career out of NetJets

 

[Heavy Set]

I've been in it for 7.5 years, and I wouldn't say it's"coming apart"; however, the industry is in the middle of a transition.The following is just my humble opinion, I'm sure others may see it adifferent way.

Netjets (and fractional ownership in general) took off on a rapidgrowth spurt in the mid-90's. For about a 7-8 year period, itessentially operated as a pyramid scheme....i.e. the sale of a sharetoday financed the loss of operating the share that was sold yesterday.Senior management gave little or no thought to making the operationsefficient, and their planning horizon was about 3 weeks in the future.In short, senior management did not do their job in planning for thefuture. The end of rapid growth was inevitable, but they seemed toignore that.

When the growth curve leveled off in 2001/2002, the operational costsstarted to eat their lunch. This started a major shakeup/reorganizationthat has seen virtually a 100% change in operations management. The newcrew inherited a mess, many good things have been done to fix theproblems, but many, many things remain to be done.

Fractional ownership as an industry is here to stay. In some respects,it may have been oversold, and it's continued growth may slow down oreven level off completely; but I doubt it will go away. I couldn't saywhat the future at the other fractionals looks like, but as far asNetjets goes, I think it's long term future is directly related to howlong Berkshire Hathaway is willing to wait for it to becomeconsistently profitable, and how small a return on their investmentthey are willing to accept.

Seriously, one of the better posts I have read in awhile. Very well stated.