Fractionals in the Coporate World

[Diesel]

Frac's bring a lot of people into flying that would otherwise not be into aviation. A lot of these people get hooked.

Thank a fractional pilot for your job.

I'll expect to be bought a beer next time you swing through new england.

 

[h25b]

Frac's bring a lot of people into flying that would otherwise not be into aviation. A lot of these people get hooked.

Thank a fractional pilot for your job.

I'll expect to be bought a beer next time you swing through new england.

Oh, you mean people like Don Imus... Gee, thanks.

I was watching him on MSNBC a few weeks ago when he was telling us how most of the NetJets pilots are former Air Force One pilots. Boy, you guys must have some real dandy individuals in sales.

 

[Gulfstream 200]

Oh, you mean people like Don Imus... Gee, thanks.

I was watching him on MSNBC a few weeks ago when he was telling us how most of the NetJets pilots are former Air Force One pilots. Boy, you guys must have some real dandy individuals in sales.

please, let Netjets have them..keep them out of the general population.

 

[h25b]

please, let Netjets have them..keep them out of the general population.

My thoughts exactly. NetJets fills the important niche of thinning out the herd before us poor ba$tards have to deal with them. Albeit, a few do slip by but without NetJets our lives would be truely miserable.

 

[TXGold]

Oh, you mean people like Don Imus... Gee, thanks.

I was watching him on MSNBC a few weeks ago when he was telling us how most of the NetJets pilots are former Air Force One pilots. Boy, you guys must have some real dandy individuals in sales.

That is Diesel's profile! Imus, what a tardgimp.

 

[NJAowner]

It is very possible that the CEO was trying out the fractional for personal use. Many large public companies with flight departments have come under scrutiny of Wall Street analysts and regulation of the SEC to disclose personal use of the corporate fleet by top executives. The IRS has been involved as well. This use also includes when the executive flies from NYC to Florida on a Friday evening for a "business golf meeting over the weekend" and returns early Monday morning. And when this only seems to happen in January, Feb and March, coincidentially when the wife is also in Florida. Strange how it happens that way. It never seems to happen in the summer when those important golf meetings are held in Nantucket.

I know of a few companies who have acquired frax shares for the personal use of the executives. They also require for security that the executives do not fly commercial. These situations are fully disclosed in the fine print and the executives fully reimburse the coprporation. It is very easy to determine the reimbursement amount when the corp pays NJA. It is tougher to determine the proper reimbursement cost per hour when all costs are lumped into the flight department. (Do you include hangar costs, insurance, medical benefits, pensions, etc.) The flight department has the experience and expertise to evaluate and monitor the frax service and safety instead of relying upon the executive's wife or secretary.

Fly safe.

 

[GVFlyer]

A question for coporate pilots. How much of a concern is it when a major coporate flight deparment in the northeast signs a five aircraft deal with a fractional. I'm considering leaving a fractional for coporate. However, this new information concerns me.

Thank you!

I dunno, ask the guys at Dresser, Freeport-McMoran or Crystal. Oh, wait! Their flight departments don't exist anymore.

Some flight departments, like Seagrams, who had two full shares before they went away when Vivendi bought them, successfully use shares for supplemental lift and maintain their base flight departments.

It's interesting that 200 hours per year is the only utilization point that makes financial sense for fractional aircraft ownership (hence the QS for Quarter Share on NetJets' tails), but some companies that fly more than that are willing to take the financial hit to keep an airplane off the books for PR with the Board, stockholders, and the public.

I think it's a misnomer to call NetJets et al, corporate aviation. Corporate flight departments do not generate a profit, rather they are productivity multipliers, in many cases making the companies core missions possible. Fractionals on the other hand do, like the airlines, generate a profit based on passenger transportation. So to paraphrase Rudyard Kipling, "Corporate is corporate and fractional is fractional and never the twain shall meet, Till Earth and Sky stand presently at God’s great Judgment Seat;" Oops, got carried away. I'll stop now.

Frac's bring a lot of people into flying that would otherwise not be into aviation. A lot of these people get hooked.

He's right, you know. There's a lot of people out there who can afford a 1/8th or a 1/16th share who couldn't begin to afford a whole airplane. The end result is that there's a bunch of folks flying around who would otherwise be taking a Red Tail, so the fractional industry has created a lot of pilot jobs. At first, with the exception of NJI, they didn't pay anything, but that seems to be in the process of getting fixed.


GV





~

 

[NotFurloughed]

But...

actually yes we can. 3 and even 4 in augmented crews.

the beauty of having over 2500 pilots in the us, and a couple of hundred more in Europe at the ready

Yeah, but you know, I'd rather do it on G200's schedule and paycheck...

 

[Diesel]

I think it's a misnomer to call NetJets et al, corporate aviation. Corporate flight departments do not generate a profit, rather they are productivity multipliers, in many cases making the companies core mission possible.

Did you see our balance sheet? Neither do we.

 

[MNR]

I was under the impression that the fractionals make their money by selling airplanes not by flying people around. They pay a pretty hefty price to get companies to provide suplimental lift on a regular basis for them.

The business model the fractionals operate under demands the need for it. When your selling one plane to 4 people its eventually going to catch up with you.

From what I understand Net Jets and the other fractional operators are happy if they just break even on air ops. The real bread and butter of that industry is the buying and selling of airplanes. What will be interesting to see is what happens in the long run. Can fractioanls continue to make money that way or will they eventually have to streamline their air ops to be profitable? It will be interesting to see as the industry matures.

I personally would rather find a solid Part 91 operation to fly for eventually. Right now I fly for one of those companies that regualrly provides that supplimental lift. As much as I enjoy doing what I am doing now I do not think I would be interested in doing it at Net Jets or any other fractional for the next 20 years. Plus in the back of my mind I wonder about the long term viability of the business model. Only time will tell.

A solid Part 91 department ultimately can provide a level of customer service that the fractionals cannot match. That is the business we are all in. Flying the aircraft is of course the other large part of that equation but fail on the customer service end for the CEO and I bet you don't have a flight department for very long. So if you can find a Part 91 op that does things right I don't think you would have much to fear. There will be exceptions to this of course but as with any area of our industry no job is completely secure.

 

[GVFlyer]

I was under the impression that the fractionals make their money by selling airplanes not by flying people around. They pay a pretty hefty price to get companies to provide suplimental lift on a regular basis for them...

...From what I understand Net Jets and the other fractional operators are happy if they just break even on air ops. The real bread and butter of that industry is the buying and selling of airplanes. What will be interesting to see is what happens in the long run. Can fractioanls continue to make money that way or will they eventually have to streamline their air ops to be profitable? It will be interesting to see as the industry matures...

Warren Buffett's 2005 Letter to Investor's would seem to suggest otherwise.

In flight services, earnings improved at FlightSafety as corporate aviation continued its rebound...

Operating results at NetJets were a different story. I said last year that this business would earn money in 2005 – and I was dead wrong.

Our European operation, it should be noted, showed both excellent growth and a reduced loss. Customer contracts there increased by 37%. We are the only fractional-ownership operation of any size in Europe, and our now-pervasive presence there is a key factor in making NetJets the worldwide leader in this industry.

Despite a large increase in customers, however, our U.S. operation dipped far into the red. Its efficiency fell, and costs soared. We believe that our three largest competitors suffered similar problems, but each is owned by aircraft manufacturers that may think differently than we do about the necessity of making adequate profits. The combined value of the fleets managed by these three competitors, in any case, continues to be less valuable than the fleet that we operate.

Rich Santulli, one of the most dynamic managers I’ve ever met, will solve our revenue/expense problem. He won’t do it, however, in a manner that impairs the quality of the NetJets experience. Both he and I are committed to a level of service, security and safety that can’t be matched by others.

GV

 

[h25b]

I think this has, and will continue to be their biggest challenge. In their beginning their cash cow was in fact the sale of shares. Actual operations is not a profitable business at all and uncle Warren is not in this as a hobby. Ask any charter operator how easy it is to make money.

I'm still waiting to see how the big payraises end up affecting the bottom line.

 

[sydeseet]

Did you see our balance sheet? Neither do we.

True, but NJ was started as and remains a for-profit-enterprise. The profit may be elusive, if at all possible long-term, but is the end goal.