How Slow Are Things For You Frac Guys??

[jetlag7]

realityman,

I have not (nor will I) commented on where NJ makes its money. Unless RTS has spoken publicly about it, I would consider it proprietary information, not appropriate for a public forum.

My point was simply that a comparison (either by percentage or raw numbers) of aircraft airborne at any given point in time is a poor indicator of the relative economic health of the various fractionals (absent a significant amount of additional data). It might be relevant if we knew if the flights were revenue or not. It might also be relevant if we knew exactly where the companies' profits are generated (meaning, does NJ make as much profit per hour as Flex or Shares). It would also be important to know if each fractionals' flying is evenly (or similarly) distributed throughout the day to evaluate whether the "snapshot" is reflective of a company's total flying.

Fraternally,

Brian

Excellent point!

Tracking number of "revenue flights" in the sky on a given day may be a viable barometer for health of an AIRLINE or charter operator, but it doesn't translate as well for determining the health of a FRACTIONAL operator.

Where NetJets (and other fractionals for that matter) make money was explained to me a few years back.... I'll break it down using 2005 numbers so there's no danger of disclosing anything confidential.

Although hourly usage fees are a part of the equation, the majority of revenue is generated by AIRCRAFT SALES.

Say a popular jet costs $15 million. NetJets negotiates a purchase agreement to buy 50 of 'em for the "bulk-order" discount of $14 million each.

NetJets turns-around and sells 1/4-shares ("quarter-shares') at $4 million each - totaling $16 million per plane. Right off the bat, they just made $2 million per jet.

Aircraft Sales alone accounted for 40% of Total Revenue in 2005. ($913 million)

So now we have a lot of folks who own a share of a jet... now what? NetJets then enters into an operating contract with each owner to fly and maintain the aircraft for them. Owners pay "Monthly Management Fees" to cover fixed costs such as infrastructure, labor, insurance, etc, and they pay "Hourly Usage Fees" to cover variable costs such as maintenance, fuel, landing fees, etc.

In 2005, Monthly Management Fees accounted for 25% of revenue ($574 million) and Hourly Usage Fees accounted for 32% of revenue ($725 million).

The remaining 3% of revenue ($75 million) came from profits generated by aircraft leases through the Executive Jet Management branch of the company.

Let's recap:

Aircraft Sales $913 million
Managenent Fees $574 million
Hourly Fees $725 million
Aircraft Leases $ 75 million
----------------------------
Total $2.287 billion

So at least in 2005, hourly usage fees only accounted for 1/3 of revenue. The majority, (aircraft sales and monthly fees) is paid long before any planes get airborne.

Rather than spending hours a day on FlightAware.com tracking number of aircraft in the sky on a day-to-day basis, I think time would be better spent paying attention to the number of new aircraft orders/sales. (of course, that information is a lot harder to come by)

 

[realityman]

jetlag,

It's not that I don't agree with what you're laying out, it's just that the actual flying is a reflection of all the other factors you listed.

Look, it's very simple. Our owners aren't purchasing these planes just to have, like a rare car or something. They aren't buying them to keep covered in a hangar somewhere, only to be brought out on special occasions or to show off.

The shares and jet cards being sold are so they can use their plane to FLY SOMEWHERE! I don't see any reason for someone to purchase a fractional share or jetcard and then not use their resource.

So, if the flying is way down, you can bet your last dollar that sales are way down. No flying means people aren't buying. As for current owners, they're probably cutting back some too.

I'm not the harbinger of doom. Just seeing things as they are. No, I don't have any inside info as to our actual sales numbers, just using a little deductive reasoning. So I will also make the disclaimer I could be completely wrong. But I wonder........

I'm fairly certain we'll survive. Just not sure what things will look like here at NJA when we come out the other end of this wretched economy (whenever that may be).

 

[clickclickboom]

Jetlags info shows just how vulnerable all fractionals are right now. Even if new share sales are down 50% ( and that figure is probably very conservative) that is a $450,000,000 drop in revenue based on 2005 dollars.

On a positive note NJ may be able to renegotiate many of there existing and future orders as manufacturers scramble to sell product and keep their employees working.

Whats real sad is that I remember a day in Cuyahoga County not to long ago when there was excitement because flops had over 100 birds in the air. To watch what has become of flops is truly sad ( even if i did see the writing on the table and leave over 3 years ago)

Good luck guys

 

[CALRepublic]

Jetlags info shows just how vulnerable all fractionals are right now. Even if new share sales are down 50% ( and that figure is probably very conservative) that is a $450,000,000 drop in revenue based on 2005 dollars.

Well Jetlag is a pilot (I think), when he becomes Santulli's right-hand, then we'll worry....As far as I'm concerned, we all (pilots) know about the same, which isn't much....

These public forums are for entertainment purposes only. If we start taking everything we read on here seriously, we'll drive ourselves crazy.

 

[Mike Jenvey]

jetlag7, you also have to take into account the contracted residual "loss" of any share should an owner decide to leave the NJ programme.

 

[captain dad]

I know everyone wants answers to the impossible questions. I really don't know how to judge the health of our company. Aircraft, even revenue aircraft or aircraft aloft, do not mean much on a day to day basis.

Personally, I have only had two slow weeks in the last 6 months. I am flying like a bandit nearly everyday.

I think the important thing is that our boss is making a statement and a commitment to both our employees and our clients.

Safety, Stability, strength.

Not just for day to day flights but for the investments made by our owners and Marquis clients.

The industry has slowed, obviously. Will it rebound? Always has. Seniority is the only thing that gives anyone any kind of security.

I am a true believer that if you provide a high end quality product that is both needed and desirable, you will always have a job. If it takes a while to hire again, so be it. Life isn't going to stop and I have no control over it.

So relax and enjoy the ride.

 

[av8trinabarrel]

5 pax legs the last 2 days and 3 more today!

I'm liking this trend!:beer:

 

[jetlag7]

Well Jetlag is a pilot (I think), when he becomes Santulli's right-hand, then we'll worry....As far as I'm concerned, we all (pilots) know about the same, which isn't much....

2 airline bankruptcies and 1 furlough before my 40th birthday.... still on my first wife though -- does that qualify??

 

[Hogprint]

The one good thing about slow is you get your rest...

 

[RP170]

5 pax legs the last 2 days and 3 more today!

I'm liking this trend!:beer:

Hotel show in TEB the last 2 days here. Head home tomorrow. Only 1 revenue leg on my 5 day tour. But, then again, the Ultra doesn't really count.