Net Jets to Furlough 500...??? Right...

[gunfyter]

Glass,

If it walks like an Egyptian, and talks like an Egyptian ... it must be a pyramid scheme.

All businesses pyramid.

Fractional models are Leveraged to a high degree on OPM and other people's assets (Aircraft). Very beneficial during growth (like a pyramid scheme).

During a decline ... leverage works in reverse .... So this is bad. A 20% decline in demand does not just produce 20% less profit but produces possibly real losses and a crunch on cash/credit.


Fractional Aircraft Ownership has similarities with
Fractional Reserve Banking.

When a Bank has a reduction in its reserves of $1 Million ... because the reserve is Leveraged up to 10 to 1 ... = a possible drop in assets on the books of ten times that or $10 million.

The fracs have a similar issue. While bank deposits are part of a Banks Reserve.... Fractionally owned aircraft are the RESERVE of the Fractional Airline.

When owners leave a program ... we have a de-leveraging ... not as simple to calculate as what happens with banks though.

Additionally, when the assets Banks hold in Reserve ( like mortgages) experience a devaluation ... leverage works against it .... ($1 million in Mortgage backed Securities that becomes worthless reduces the reserve by $1 Million but the assets by $10 million).

The Airplanes bought back by the fracs reduce the Reserve ... and like worthless mortgages ... create PAPER losses to the Fractional because of MARK_TO MARKET accounting rules. Leverage effects also apply.

 

[HazMat]

Just for kicks could can someone post the Netjets financials for 08 and 09 or are these unavailable.

If they were really strong i think they would at least be referenced in Berkshires quarterly financials

 

[CA1900]

Just for kicks could can someone post the Netjets financials for 08 and 09 or are these unavailable.

2009 has a ways to go. Here are the two years prior, though:

2008
2007

All of Berkshire's reports are available on its website: http://www.berkshirehathaway.com/reports.html


Neither the 2008 nor 2007 report breaks down Netjets' profit with a specific number (which is why I didn't link it originally, since I was responding to the specific assertion that we've never made money), but here's what the 2007 report says about Other Service Businesses, which we fall under:

Revenues from the other service businesses in 2007 increased $1,981 million (34%) and pre-tax earnings increased $310 million (47%) as compared to 2006. The increase in revenues and pre-tax earnings in 2007 versus 2006 was attributable to the impact of business acquisitions (primarily TTI and Business Wire) as well as increased revenues and pre-tax earnings from FlightSafety and NetJets. Both of these businesses benefited in 2007 from higher equipment (simulators and aircraft) utilization rates and from increased customer demand.

2008 wasn't a banner year for anybody in the flying business, and we're no exception:

Pre-tax earnings of $971 million in 2008, were relatively unchanged from 2007. The impact from the TTI acquisition and increased earnings of FlightSafety was offset by lower earnings from NetJets and Pampered Chef. In the fourth quarter of 2008, NetJets, and to a lesser degree Pampered Chef, experienced a significant reduction in revenue as general economic conditions worsened. This resulted in lower customer usage and demand which negatively affected operating margins.

 

[HazMat]

Kind of hard to understand why Netjets financials aren't broken out in 2007 and 2008 like they were in prior years for example in 2006.

"NetJets generated pre-tax earnings of $143 million in 2006 as compared to a pre-tax loss of $80 million in 2005 reflecting a 23% increase in flight..."

It obviously was good news in 2006 compared to 2005. You would have thought if that trend continued we would have seen similar reporting in 2007. The fact is we have no idea what the pre tax earnings are in 2007 and 2008. We are all making assumptions since Netjets earnings are not specified after 2006. It is interesting that they are not broken out though after the pattern was set to do so in 2006.

 

[gunfyter]

The performance was broken out more in the Quarterly reports....

At the time we had concluded that NJ probably made 200 to 250 Million in 2007 and similar track in the first half of 2008.

Here is the thing about Netjets .... Like the Verizon commercial ...

Its the NetWork behind it. "Everything else is just a plane..."

NJ is building a vast global network of luxury private jet transportation system. No one else is. That's the business model.

That and ... Safety and Stability .... To continue the Banking analogy... When you place your assets with us ... you can feel reasonably assured of the safety of your asset (Airplane). Berkshire Hathaway and Warren Buffett are looking at our books.

Now Glass may feel only Avantair has a "sustainable business model" ... I don't feel that way. I feel there is safety and security ... both for the employees and the fractional owners at NJ.

People aren't going to to be stiffed like the aircraft owners and pilots at Jet Direct Sentient Flight Group were if you read this months AIN.

 

[jppt2000]

Fractional models are like a pyramid scheme where they HAVE to continue to grow or the whole thing collapses. You have to sell new shares so you can sell old planes at profit and keep the operation going.

Guess what? The used plane market has tanked. Still yuk'n it up? Not one of the fractionals have a sustainable business model, possibly save one. When the new sales dry up and the ability to sell aircraft to shore up cash flow ceases then it's gonna get tough.

Gotta get back to my village now...

enjoy....

Glass, which fractional with the sustainable business model are you referring to?

 

[HazMat]

you are speculating that netjets made 200 to 250 million in 07 and was on a similar track in 08 but Berkshire choose not to break them out financially like they did in 06 and like they do with everyone of their successful Companies. That really doesn't make sense. If the business was growing like that in profits I cant imagine they wouldn't have broken them out financially. I believe that Netjets must do well for the entire industry to do well so I wish that were true but it is highly unlikely.

 

[jppt2000]

Kind of hard to understand why Netjets financials aren't broken out in 2007 and 2008 like they were in prior years for example in 2006.

"NetJets generated pre-tax earnings of $143 million in 2006 as compared to a pre-tax loss of $80 million in 2005 reflecting a 23% increase in flight..."

It obviously was good news in 2006 compared to 2005. You would have thought if that trend continued we would have seen similar reporting in 2007. The fact is we have no idea what the pre tax earnings are in 2007 and 2008. We are all making assumptions since Netjets earnings are not specified after 2006. It is interesting that they are not broken out though after the pattern was set to do so in 2006.

Actually this is pathetic.
Now a conspiracy theorist, who just happens to fly a P180, maybe for the same fractional with possibly the only "sustainable business model" has voiced another fact filled opinion.
Now we have a village missing an idiot and a moron, with laptops.
Someone draw them a map please, preferably in crayon.

 

[HazMat]

No conspiracy just pointing out the obvious facts. You have me wrong I am a fan of Netjets and trully root for their success. Netjets success will only help us grow

 

[glasspilot]

Know how to tell who is losing an argument? It's the guy that starts with the profanity and name calling.

Village idiot? Moron? Conspiracy theorist?

What did I say that so touched a nerve? That I thought NetJets never made money? That possibly only one fractional possibly had a sustainable business model?

Golly Gosh, lighten up francis'es!