Net Jets 2005 Report

[notaNJApilot]

Man, $80 million dollar loss vs. a $10 million gain in 04?

If you look further is also seems to say that there was a pre-tax charge if $85 million for subcontracted 135 aircraft.

Ouch.

Any idea how NetJets is gonna prevent aircraft shortage this year? Perhaps one way of doing this would be to put some heavier restrictions on the Marquis fliers. Just my humble opinion.

Holden1

It's not always aircraft shortage. It's pilot shortage resulting in aircraft without pilots. The hiring spree will hope to provide scheduling with an adequate number of crews.

 

[Twotter76]

In reading this report - two things jump out at me. Expenditures for the flight services were up 660% from the previous year where they had been at a fairly linear level up to now. And more specific to Netjets, without the $85 million in subcontracted aircraft and the $20 million adjustment for back pay NJA would have posted a pre-tax profit of $25 million, a substantial gain over the $10 million in 04. Seeing as neither of these should apply to 06 (there will obviously still be some aircraft subcontracting but nothing like last year) perhaps we can finally show some good numbers this year. Thoughts?

 

[BBJPILOT]

Man, $80 million dollar loss vs. a $10 million gain in 04?

If you look further is also seems to say that there was a pre-tax charge if $85 million for subcontracted 135 aircraft.

Ouch.

Any idea how NetJets is gonna prevent aircraft shortage this year? Perhaps one way of doing this would be to put some heavier restrictions on the Marquis fliers. Just my humble opinion.

Holden1

Yea, we got rid of Boisture and his foolish "Sell the Core Fleet" mentality of a couple of years ago. Just before he was booted, he had changed his tune, as is shown in the BH report, and now it is "we are buying additional core fleet aircraft". Duh, what a concept. Seems 3500 owners doesn't divide well into 400 aircraft.

Quite simply, they used good old common greed in 2004 and sold the core fleet aircraft, contributing nicely to that big $10 million dollar "profit". However, in 2005 they paid for it multiple times over. Throw in a group of pissed off pilots and over worked aircraft, and sell-offs ate them a new one. 18 years, yet nobody was able to convince Boisture that we actually need core fleet aircraft! They seem to think that when flying is slow that they can get rid of the needed additional aircraft, and then are shocked when it picks up and it then takes 18 months to get new aircraft delivered. Oh well, it all looks good on the ole Berkshire 1040EZ!

 

[BBJPILOT]

Man, $80 million dollar loss vs. a $10 million gain in 04?

If you look further is also seems to say that there was a pre-tax charge if $85 million for subcontracted 135 aircraft.

Ouch.

Any idea how NetJets is gonna prevent aircraft shortage this year? Perhaps one way of doing this would be to put some heavier restrictions on the Marquis fliers. Just my humble opinion.

Holden1

They did!

 

[GVFlyer]

This sucks...

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.


​

http://www.berkshirehathaway.com/letters/2005ltr.pdf

Unfortunately, this is not new news. I have BRK.B in my portfolio and this letter is very similar to last years BH Letter to Investors except that the losses are significantly more in 2005 than they were in 2004. It appears that once again Flight Safety International profits helped to offset NetJets losses for the aviation sector.


GV

 

[niteflyr]

And I wonder how much of FSI's income came from the Netjets expense column? One pocket to another.

 

[SeaSpray]

And I wonder how much of FSI's income came from the Netjets expense column? One pocket to another.

Doesn't matter. FSI's profits didn't offset the $40 million NetJets lost during the first 9 months of 2005. While I'm not a stock holder and don't get the investor's letters that the well-compensated Captain GVFlyer gets, SEC filings are a matter of public record. This is what Berkshire Hathaway posted on 5 January 2006 for third quarter 2005.

Pre-tax earnings of the flight services segment for the third quarter of 2005 decreased $9 million (17.6%) from the third quarter of 2004. For the first nine months of 2005, pre-tax earnings declined $17 million (14.5%) from 2004. Pre-tax earnings for the first nine months of 2005 from FlightSafety increased $9 million (7.2%) as compared with 2004. The increase was due to increased training revenues and simulator sales. NetJets incurred a loss of about $40 million for the first nine months of 2005. In the first half of 2005, NetJets experienced unusually high shortages of available aircraft in the NetJets program due to peaks in customer usage. Shortages of aircraft also occurred during the third quarter of 2005. Consequently, incremental costs were incurred to charter additional aircraft to meet peak demand. Such costs are not fully recoverable from clients and produced incremental costs of approximately $65 million during the first nine months of 2005. Additionally, interest expense for the first nine months of 2005 increased $16 million due to higher rates. NetJets and FlightSafety continue to be leaders in the aircraft fractional ownership and training markets.


SS

 

[Fozzy]

Okay,
So if NJA/I folded, how do you think FSI would do?

 

[SeaSpray]

Okay,
So if NJA/I folded, how do you think FSI would do?

They would still be the largest training provider for aircraft and ships in the world and equally as profitable as they had been before NetJets began using their services.

SS

 

[ghostrider64]

Read on the screen today that there were a total of ZERO sell-offs today.... Wonder what's different from last year around here.... DUH