NetJets--Earnings Release

[AvroJockey]

HMMM Let's see--I think if you look back at my earlier threads (about 2 weeks ago)I said Netjets was bleeding out at a rate 2 mil a day for the first half of the year and was thoroughly brow beaten and told how wrong and screwed up I was by several on here. (you know who you are) But I think these numbers pretty much vindicate my statement.

BTW your math isn't very good. The majority of the losses were a result of write downs and paying for voluntary measures ($255M!!!) That leaves $94M in losses over 6 months...that's about $522,000 a day, not $2M. Also, of the $522,000 we don't even know what's operational, so stop your fear-mongering until you can post a 10-Q and take financial accounting to properly read it.

From where I've been sitting the last couple months. There's no way NJA can furlough...I've been busting my butt, and the early-out guys have only just started leaving.

 

[AvroJockey]

Some of the losses reltaed to used a/c are on paper and may not be realized ever (at which point profits will be inflated) and the tranactions are a wash.

Generally, when you are holding th investory of jets for sale, the accounting rules will require write downs in the following situation. Let's say you bought back 20 Excel shares form owners at an average price of $500,000. Your cost is $10 million. If the market craters like it has, and you then resell 1 of the used shares at $300,000, you need to value the remaining 19 sahres ar $300k each, or $5.7MM. You will then be required to take a write down of $200k per remaining share (or $3.8MM) even if you continue to hold an ddo not sell the other 19 shares.

Also, while NJ has losses, BH may want to have more losses at NJ to offset gains elsewhere. It doesn't justify the losses, but may very well magnify them.

Fly safe.

There you go NJAowner...being smart again! You know this board isn't for logic, reason, and God forbid...MATH!!!!

 

[gunfyter]

What about the cash flow out to buy back shares? Where does that show up ... write down or operational costs?

 

[gret]

Write downs and downsizing expenses, whether voluntary or not, are losses. Sales were down overall by over 40% and aircraft sales were down 82%. The company lost a heck of a lot of money any way you look at it.

Doubtful that the write downs will ever reverse as the market is already flooded with a/c and they have been trying to dump their excess already.

The write downs on the a/c inventory don't generate tax losses until realized and it is crazy to lose a dollar to save 35 cents in taxes.

Things can't be looking too good for the 3rd qtr either as they decided a change had to be made. There is no good news here and ignoring, or rationalizing, the numbers won't make it better.

 

[HiSpeedFlyer]

Some of the losses reltaed to used a/c are on paper and may not be realized ever (at which point profits will be inflated) and the tranactions are a wash.

Generally, when you are holding th investory of jets for sale, the accounting rules will require write downs in the following situation. Let's say you bought back 20 Excel shares form owners at an average price of $500,000. Your cost is $10 million. If the market craters like it has, and you then resell 1 of the used shares at $300,000, you need to value the remaining 19 sahres ar $300k each, or $5.7MM. You will then be required to take a write down of $200k per remaining share (or $3.8MM) even if you continue to hold an ddo not sell the other 19 shares.

Also, while NJ has losses, BH may want to have more losses at NJ to offset gains elsewhere. It doesn't justify the losses, but may very well magnify them.

Fly safe.

NJA Owner,
I was wondering when you would say something....do you wish to comment on this weeks past going ons? I'd be curious for your perspective.

 

[B19 Flyer]

HMMM Let's see--I think if you look back at my earlier threads (about 2 weeks ago)I said Netjets was bleeding out at a rate 2 mil a day for the first half of the year and was thoroughly brow beaten and told how wrong and screwed up I was by several on here. (you know who you are) But I think these numbers pretty much vindicate my statement. I also mentioned which entities were making money and which were not--take my word for it guys, I got that right too. I also made a few more statements about furloughs. They are coming guys! If you know anything about the psychological approach to an HR department you will know that they advocate lay-offs and furloughs during peak emotional highs---think holiday season! The rationale is that people are way up so when you take them down the low isn't AS low as it would normally be. Watch between Thanksgiving and the first 2 weeks in Jan for 300-500 pilots to go out the door. The dust doesn't need to settle on the early out and LOA packages, they already have a good idea what those numbers are and they aren't good enough. Read WBs biography Snowball if you want a little insight. He isn't that grandfatherly image you see on TV. RS was too compassionate in his "right sizing" efforts for the BH boys. I've seen it at other companies that are BH owned or where WB is on the board and carries the big stick. The blood letting is coming---operationally it will come relatively fast---from the HR perspective on the time table I predicted above unless the economy makes a miraculous recovery. There aren't going to be anymore compassionate "please leave" programs. Here is your 2 months furlough pay--cya! FOR WHAT IT IS WORTH DEPARTMENT: THIS IS ENTIRELY SPECULATION ON MY PART. But I have a pretty good track record so far!

Now I have a question for the "in the know" union bretheren. If BH wanted to sell off assets from NETJETS---hypothetically let's say NJI (Okatie, SAV maintenance, etc.) to an outside buyer (think one that is no longer employed by Netjets or say General Dynamics or Gulfstream) could they? What are the limitations imposed by the CBA or LOAs that would prevent this type action? I also understand that multiple owners have the airplanes---could they not transfer the management of these aircraft if they so desired? I don't know the answers to these questions--just asking!

The conspiracy grows!

Harley,

For the past three years I've been saying that the "industry leading contract" at NJ wasn't going to stick. There would be a correction, and when it happened it would be nasty. I've compared it with the industry leading contracts that the majors got in 1999 and 2000, only to see them collapse under the weight of bankruptcy and near bankruptcy in 2001 and 2002 when the economy slipped. Back then, everybody blamed the high-priced CEOs, not the incredibly high cost of labor or the fact that the unions wouldn't react in a timely manner.

These packages the union negotiated are kicking the daylights out of the bottom line at NJ. I call them golden parachutes, and while they don't meet the exact definition of them, that's what they are. They are paying pilots to give up there jobs and for not working. It's utter nonsense.

Don't expect any of these guys to treat you fair, they've never treated me fair. They think the union is the answer to all their problems, and I've been predicting this mess with the NJ "industry leading contract" for years. I've also said it's going to get even worse before it gets better, and that the contract would be adjusted substantially to come back to reality before it's over.

 

[NJAowner]

Gret -- not sure of your finance experience, and while I am not a audit partner at a Big 4 accounting firm, I do have a fair amount of experience in this area. I will state that I have spent very, very little time analyzing the BH financial report (and all of the goodies are usually in the footnotes). But there is a difference in aco********************ing treatment as to whether items are an investment or inventory held for resale (and always a big argument with auditors). Most likely, the used NJ shares are considered as inventory held for resale and as such will result in a loss when the value of the inventory decreases or has become financially impaired (such as now). Of course (and I do not mean to sound adversarial) I would appreciate your knowledgable take on this and reference to the financial statements (as I will not spend the time reading the footnotes).

GF -- cash flow and income statement items (P&L) are different items. The losses show up on the P&L. WHile P&L may affect your stock price, cash flow is the more important factor in running virtually any business I know.

I think that RTS will surely be missed by the owners. he is far more than a mascot trotted out to the owners. He is (was) the face and heart of the business and was very reassuring to the owners. Most owners had tremendous trust and respect in RTS. This will be difficult for NJ going forward (but not impossible). Most owners are not aware of the inefficiencies in the business, many suppossedly at the management levels, and hopefully will appreciate a more cost effective company. He will be missed.

But I am a firm believer that no one in business is indespensible. Many companies do not have good succession plans and therefore fail. But the most powerful man in the world, the President of the United States (and I am speaking about the man in the office at any time, not any particular person, so this is not a politcal argument), is despensible and there is a well planned succession plan in place. Presidents die, tears are shed, and within moments, the business of the country and world have gone on and will go one with not even a burp. If that can happen, it can (and should) be able to happen at any business.

Fly safe.

 

[BeeDubya]

Harley,

I've been predicting this mess with the NJ "industry leading contract" for years.

If you really believe that the pilot contract is the fundamental flaw, then you must have failed basic math. Pilot salaries (and even contractual crewing ratios) do not begin to account for the losses reported by BRK. No salary cuts or contractual concessions would begin make up for reduction of sales and flying (well, maybe if you advocate that pilots fly for free).

I've noticed that all your criticisms of NJ revolves around the pilot CBA. Any consideration given to other staffing/payroll decisions made by management completely outside of the CBA? There are multiple facets of the business that have nothing to do with negotiated Union contracts. Any thought that these might also play a role in our current situation?

 

[jppt2000]

Don't expect any of these guys to treat you fair, they've never treated me fair.

You mean b19/skanza fair.
IMO, you have no credibility b19/skanza.

The earth could stop spinning around its axis, and B19 would blame it on the Netjets CBA.

This is what b19/skanza gets paid to do.

 

[realityman]

BeeDubya,

Why are you wasting any of your time with this guy? Try"ignore" like many of us have. It lends a lot more continuity to these discussions. Here's a thread talking about the huge loss of sales and precipitous drop in operational flying at NJ's, and all of a sudden this guy throws in that it's all the union's fault. Totally unrelated to what's being discussed, and actually makes no sense whatsoever congruent to what's actually being discussed, but he knows he'll get a rise out of someone on here.

Besides, the points you made have already been brought up with him ad nauseum in regards to many other companies. With him, it ALWAYS comes down to being the union's fault. He's a carpenter with only on tool in his belt. I'm sure if you asked him, he'll tell you the situation in the Middle East is the fault of unions. 9/11 happened as backlash from unions. The U.S. government is nearly bankrupt because of unions. Britney Spears is the result of unions. Blah blah blah blah.

Don't lower yourself to wasting time responding to him.