Netjets and 200/barrel oil

[CastofThousands]

Now the fact I was sitting next to you when that was said remains to be seen....:beer:

but the MAN has a point... we can be as enthusiastic as possible, any feel we are invincible, but if the lower tier owners/cardholders dry up the funds, then its a whole new ballgame.

"no company is invincible - and due to economic cycles they all get tested - time will tell."

Need he say more.

Me thinks we can whether this storm with a minimal amount of damage to our lifestyle... but it will take a little more effort and a concerted effort from some of our colleagues to insure this. The battle has to be shifted from anti management (pre -2005... some still hold a grudge, and hell, i dont necessarly blame them.) to positive team concept ( by the contract and only by the contract so some of you cant try to rip into me)... and quickly. It depends on our and theirs livelihood.


'nuff said on this.. Howz about Lester's No No tonight
!!

One must always remember the [NetJets] pilots are in fact a brand, within a brand.

Every owner/cardholder knows there is Puzzle Palace service and there is flight line pilot service. By and large NetJets owners/cardholder are very loyal to NetJets pilots - which is a good thing in my mind because we work WITH NetJets and FOR the owner/cardholder.

If we make sure the owners/cardholders see the value in spending $200 a barrel with NetJets - if they can, they will.

 

[CastofThousands]

I'm pretty sure he knows what he's talking about.

Looks like the middle east XO Jet funding announcement I mentioned was released a day after I brought it forward.

It's not the best deal for XO Jet when you read the terms. Make no mistake about, XO Jet is an IPO scheme that will be an annoyance in the market well after those that created the problem make their dough - a la West Pac and Jet Blue to name a few.

They got the money and will be a big annoyance, but the model isn't viable long term. It will take a lot more money, which will be captured on the IPO, to reorganize and demonstrate longer term viability (a slow death unless they capture a good percentage of the market share.

XO Jets new and "energized" employees will work hard to bring the harvest to market (cash in their stock).

All I can say is their financing is expensive and their initial operating model (they are on their 3rd initial operating model) is flawed.

 

[CastofThousands]

No inside info here - but it's clear XO Jet will be paying 1.5X (or more) the aircraft purchase with financing tallied to the total bill.

Near term market share and growth are VERY critical to their survival to IPO. Then they will get enough to survive another cycle or two - unless they hurt NetJets. Then they will be the new 900lbs gorilla.

Now NetJets will need to aggressively go after XO Jet. Look for NetJets to make a move such as no ferry fees from UAE to UK.

IMHO,


http://www.ainonline.com/news/single-news-page/article/financiers-uncertain-amid-credit-upheaval/

Financiers uncertain amid credit upheaval
By Ian Goold
May 20, 2008
Aviation Financing


Business aviation financiers exhibiting here at EBACE’08 have arrived in Geneva largely uncertain about the full implications of the ongoing squeeze on the global credit market and the availability of funds to pay for aircraft purchases. Last month, EBACE Convention News approached six banks listed as exhibitors, but only two–Citi Private Bank (Booth No. 1441) and Bank of America (Booth No. 941)–would respond to questions about whether the fallout from the massive bad debts from the U.S. sub-prime mortgage crisis is inhibiting previously buoyant demand for business aircraft.

“The current economic situation has certainly not improved the financing conditions for buyers,” noted Toennies von Limburg, international sales director in Bank 
of America Leasing’s corporate aircraft finance department. “The full impact remains to be seen,” according to Mary Schwartz, global head of aircraft finance and managing director at Citi Private Bank wealth management service.

“I believe that spreads will increase on financing, as we see happening,” continued Schwartz, meaning that the availability of funds will tighten. “Based on what we know today, continued volatility in credit markets has significantly impacted the cost of capital across our industry.” However, she expects the business to remain profitable, on the basis that, “the market will adjust pricing to reflect wider market conditions.”

Bank of America (BoA) still finances corporate aircraft in the same way as in previous years, although the industry will be less aggressive in seeking new customers, predicted von Limburg. “There appear to be quite a few banks that are focusing more strongly on relationship clients and which will not try to grow their books at the past rate.” Accordingly, new candidates for corporate aircraft finance probably will “find it more difficult to get attractive rates, as will existing clients with weaker credit.”

Schwartz agreed that banks are not lending so easily. She said such lending had become less competitive over the past year and warned of a possible early downturn in new orders. “Between the lending crisis and the lengthy backlogs, we may see that happen very soon,” she said. Since aircraft markets lag behind the economy, the impact of the current market situation has not yet been realized.

Although there are now more used aircraft for sale, Schwartz said she had “not heard of people canceling orders for new aircraft.” Nevertheless, banks have become more selective in their lending practices, she acknowledged.

This more conservative approach contrasts with some recent lending patterns that need to be corrected, according to the Citi Private Bank executive: “There was [an aircraft] financing frenzy last year. Some firms were kind of giving money away at rates that were too low and using structures that may not have made sense,” Schwartz maintained. Now, she sees a return to more normal lending practices. Also, acquisition prices had been extremely high “particularly for an early [delivery] position on the bigger aircraft. The current environment may correct that as well.”

The trend in corporate aircraft finance over the past five years has reflected a “bigger is better” mentality in terms of aircraft selection, which has driven up the value of loan deals, she said. “Big, long-range jets are the hottest sellers, with buyers waiting three to five years for deliveries.”

BoA’s von Limburg noted two major trends: “First, an increase in prices, especially [for used aircraft], due to strong demand and long lead times for new deliveries. Second, and probably more important, [market] growth outside the U.S. While the U.S. is still home to the largest fleet of corporate jets, delivery of new aircraft elsewhere increased from 27 percent in 2003 to more than 50 percent in 2007.”

Properly maintained and managed corporate aircraft generally enjoy good residual values, but perceptions of future value vary significantly between banks, according to von Limburg. Acknowledging currently high perceived values, Schwartz said the trend creates issues for lenders and lessors, which might lend more than what she termed the “actual” value.

“Most banks will control that risk by amortizing the loan [more quickly] so [that] the residual is at a reasonable level at termination. However, most aircraft [used by private clients] maintain value very well, particularly since they tend to be used relatively infrequently, which does help to keep the market strong,” she explained.
“The market has historically been cyclical, but whenever there has been a dip, it seems to come back stronger than before.”

So will high values inhibit potential lenders if they imply that the only way to go is down? Last year, the market’s peak did not inhibit lenders, noted Schwartz, while von Limburg believes some lenders and lessors, “especially new players,” may see the need to adjust their valuations models.

Schwartz agreed, but emphasized historic market cyclic trends: “In time, values will stabilize and return [to normalcy]. In the late 1990s and 2000, they were very strong. Then 9/11 happened, the technology bubble burst and the economy in general was terrible and values dropped, some as much as 30 percent.”

However, she noted that subsequent recovery might be short-lived: “[Since] 2004 values have increased to new heights. We have seen many pre-owned aircraft, particularly the larger ones, selling for more than 100 percent of their original cost. If someone were to sell their [delivery] position on certain aircraft, they could conceivably make $10 million to $15 million on the sale. That might change now,” she concluded.

Von Limburg confirmed an earlier trend toward 100 percent financing. “While this was supported by continuously rising values, it is very likely that a softening market will trigger lower loan-to-value ratios,” he said.

Market cyclicality will not change, maintained Schwartz. “If history tells us anything, ups and downs in the market will continue. The major difference now is that [in the widened world market] I believe the ‘lows’ will not be as low [as previously]. Most industry analysts agree and feel that the ‘globality’ of the market will help to maintain its strength.”

Finally, von Limburg noted the importance of a potential aircraft finance customer’s region of operation or country of aircraft registration, saying that some jurisdictions are not lender-friendly. “We examine each to make sure we have a secure position and may require that the aircraft be registered in a friendly jurisdiction,” he said. “Different financing institutions have different target markets, but typically all will require a registration that offers a proper security interest in the aircraft.”

The other aircraft finance companies here at EBACE are Barclays (Booth No. 808), Credit Suisse (Booth No. 284), Fortis Lease Switzerland (Booth No. 1175) and SG Equipment Finance (Booth No. 975). Bank of Scotland had also been booked to exhibit but pulled out several weeks ago.

 

[captain dad]

I agree with COT about XO for the most part but if you look at their delivery schedule it will take them a long time to truly be competitive. Only 20 aircraft right now and 127 by 2012. That is only if the OEMs keep up with delivery dates; which is rare.

I understand their model and see the cost savings compared to NJ. It's not exactly apples to apples. I mean they are more a frac/charter hybrid. I don't see the unique, elite and prestigious experience of being a passenger on an aircraft that any Tom Dick or Harry can charter. You could get that for Delta AirElite or any Fly By Night charter service.

Competition? Sure, in the reguards that every operator other than NJA is competition.

Threat to NJA? Not really, or at least not yet. Maybe 10 years from now. Maybe.

We must crush them.:smash: :laugh:

 

[captain dad]

I put my money on the NetJets pilots. Who knows what mid and upper management will do....

The us vs. them mentality between management and pilots is counter productive. Let's at least give everyone the benefit of the doubt that we are all doing our best to move in the same direction.

Paddling on only one side of the canoe just makes you go in circles.

 

[Ultra Grump]

We must crush them.:smash: :laugh:

I said this back in 2005 about the nature of business and it being in our (NJA's) best interest to drive Flex, CS, and FO out of business. Stand by for the bleeding hearts to whine about how it's bad to do that because pilots would lose their jobs. Boo hoo.

 

[blueridge71]

An article in Professional Pilot by Forecasting International predicts that oil prices will decline to and stabilize at about $60 per barrel over the next couple of years due to new refineries coming online. Take it for what its worth.

 

[learflyer]

I said this back in 2005 about the nature of business and it being in our (NJA's) best interest to drive Flex, CS, and FO out of business. Stand by for the bleeding hearts to whine about how it's bad to do that because pilots would lose their jobs. Boo hoo.

Umm, it is bad.

 

[CastofThousands]

The us vs. them mentality between management and pilots is counter productive. Let's at least give everyone the benefit of the doubt that we are all doing our best to move in the same direction.

Paddling on only one side of the canoe just makes you go in circles.

It's not us vs them. It's lead by example from the front lines; a brand within a brand.

I've had my fun here for the year.

All my best,

 

[Publishers]

One of the keys to most of these businesses is residual value and marketability of aircraft when useful life is over.
XO customers like the low cost for them to fly compared to the NJ profile. All that is well but XO puts a good many hours on the aircraft through charter. Somewhere down the line, these aircraft will be sold and at that point we will see how they did. The new financing will give XO the power on the supply side to be an NJ.
As to driving the others out of business, not going to happen as you are dealing with manufacturerers with a self interest.
$200 a gallon will slow things. Rich people are not impervious to slowdowns. Many of them got the wealth by paying strict attention to the dollar. Many who fly for business will cut it back. Real Estate developers, builders, trucking companies, etcc. are impacted and will continue to slow their spending.
As in cards, this not a time to fold them but to hold them.