NetJets Profits

[Some guy]

Family Guy and hawkered....

You did not address the point I was trying to make about the Reduction in Forces of Bridgeway and Easton folks.

Are we going to be hurt by saving a couple million in RIF but then paying for it by not having those assets available to do needed work.

While it sucks seeing people get pink slips, I don't think the daily operation will be affected.

SG

 

[Number$Cruncher]

Hopefully pessimistic...

It's a lot easier to make money selling the things than it is operating them. If you have one gangbuster qtr. selling shares and then said sales falls flat you've got some problems for subsequent qtrs.

True, but not in financial reporting. Assuming the statements are issued according to GAAP reporting rules, the revenues and expenses associated with share sales are averaged over the period of the associated contracts' expected life. So, assuming NetJets is using 60 months, then the revenue and expense from share sales in a given month is actually 1/60th of what has happened over the last five years. From a financial reporting perspective, this has the effect of "smoothing out" the seasonality of share sales, both good and bad.

The point about the breakdown of revenues in Q1 and Q2 someone else made is a critical one. Management could make the case to adjust the expected contract life from 60 months to something shorter (and perhaps more accurately reflect the contract life), and POOF! A month that had previously seen only 1/60th of all prior sales margin is now 1/48th. That sure would help the financials for a company like NetJets where sales have continued to be relatively strong. I don't know whether this is what actually happened here, but knowing what the breakdown of profit from share sales and flight operations would certainly help give more insight into the health of the program.

 

[FamilyGuy]

Family Guy and hawkered....

You did not address the point I was trying to make about the Reduction in Forces of Bridgeway and Easton folks.

Are we going to be hurt by saving a couple million in RIF but then paying for it by not having those assets available to do needed work.

While it sucks seeing people get pink slips, I don't think the daily operation will be affected.

Some guy - agreed. I hate to see anyone get laid off, but I don't think it will affect the daily operations.

I haven't seen anyone in the flight center get laid off, it appears to be restricted to the non flight related departments like HR, recruiting, training, subcontracting, etc.

 

[Hawkered]

I heard that the hiring freeze is over in the Flight Center. Owner Services seems to be doing a much better job of informing the passengers about baggage space and fuel/load restrictions. In fact, everything has improved enormously.

The antagonists need to dry up and get back to work, where their energies and paychecks should be directing them, (as well as any sense of self-preservation).

 

[Some guy]

I heard that the hiring freeze is over in the Flight Center. Owner Services seems to be doing a much better job of informing the passengers about baggage space and fuel/load restrictions. In fact, everything has improved enormously.

The hiring freeze does seem to be over...As for now, the only spots being filled are those that have opened due to artrition.

There are a lot of good things happening in many departments. Things are slowly getting better.

SG

 

[gunfyter]

Some guy - agreed. I hate to see anyone get laid off, but I don't think it will affect the daily operations.

I haven't seen anyone in the flight center get laid off, it appears to be restricted to the non flight related departments like HR, recruiting, training, subcontracting, etc.

See this is what we were hearing. People had to lose their jobs to pay for pilot raises.
Also we heard No raises for the earth people at CMH because of pilot raises. Whats the truth? Will there be raises or no?
...Here is my prediction. 3rd quarter profits similar to the 2nd qtr will outpace losses in the 4th. 2006 will be a net profitable yr. 50 to 100 Million

 

[RTRHD]

I airlined home yesterday. What a mess, that has got to help sales. I think that was the last nail for a lot of carriers.

RTRHD

 

[gutshotdraw]

I airlined home yesterday. What a mess, that has got to help sales. I think that was the last nail for a lot of carriers.

RTRHD

You got that right. Just when you thought the airlines had turned the corner.....

Any of you still not going to travel in uniform?

(Sorry. Thread hi-jack alert)

 

[batsky2000]

Well since I have always traveled in my uniform, this will be no big deal to keep doing it, from what I have read else where on this site is that uniformed crew members are exempt from the TSA rule of bringing lotions,shampoo,tooth paste,etc..., so we shall see if that is true

 

[RTRHD]

Any of you still not going to travel in uniform?

I didn't before, but I will now!!! Besides, I hear you can make two bucks a bag while you wait on the Van. (If only we had Hats.)

 

[Publishers]

There are some very good points here. Flying this summer has been slow and that is good for Netjets. Guarnateed income, minimum expense and sell off/. The control of the Marguis card, the effective scheduling, all these things make an important impact. This is a October to June business, let's see what happens.

 

[gunfyter]

You making any Predictions or taking bets?

 

[FamilyGuy]

See this is what we were hearing. People had to lose their jobs to pay for pilot raises.
Also we heard No raises for the earth people at CMH because of pilot raises. Whats the truth? Will there be raises or no?
...Here is my prediction. 3rd quarter profits similar to the 2nd qtr will outpace losses in the 4th. 2006 will be a net profitable yr. 50 to 100 Million

Merit raises are supposed to be coming out Sept 1 and will be back dated to May, when they were originally scheduled to be done.

You're probably right with your prediction that 3rd quarter profits will be similar to 2nd quarter, with losses in the 4th, and a total years profit between 50-100 million. The final total will depend on the following:

- subcontract rate in the 4th quarter
- net aircraft deliveries in the last half
- sales (probably helped by yesterday's events)
- mgmt's ability to balance sales against the need to build core fleet

Even if everything goes well and we come in on the high side of that prediction, 100 million profit on 3 billion in revenue is just a 3% profit. Not much for a capital intensive business. Would any of us be satisfied with a 3% return on our investments?

 

[gunfyter]

Yes I would.You are making it on volume... like Walmart. Or better yet Las Vegas Casinos... 3 billion $$$ of Other people's money. I'll take 3%. All day long.

 

[FamilyGuy]

Yes I would.You are making it on volume... like Walmart. Or better yet Las Vegas Casinos... 3 billion $$$ of Other people's money. I'll take 3%. All day long.

Interesting.... you might want to check the news. Not even the US Government will loan money for 3% anymore. They currently loan money at 5.25%....

Kind of shoots holes in your volume argument.

 

[RTRHD]

All of you guys are making some good points. A profit is still a profit. A lot of people are making a living, people are getting where they need to go. (safely) I am not smart enough to get in investment conversation. But being in the green is still good right. This may be fast becoming a service industry,as in a necessity for those who can afford it. (Not a luxury type service) But still is a luxury if you know what I am trying to say.

 

[Number$Cruncher]

Whoa Nellie!

Yes I would.You are making it on volume... like Walmart. Or better yet Las Vegas Casinos... 3 billion $$$ of Other people's money. I'll take 3%. All day long.

I'd like to do business with you! It's the return on the cash you invest that matters, nothing else. Think about that...if you want to GET a lot of money back on your investment, then you'll need to INVEST (and put at risk) a lot. With a more profitable business, you'll need to put in less to get the same amount.

At a 3% return on invested capital, you're about even with inflation. Even savings accounts, most CDs annd government bonds are returning more than that, and they are essentially risk-free. Investments in fractionals like NetJets are not!

A decent rate of return to an investor is going to need to reflect the risk of his investment. BRK is going to want to see 7-10% NET (after tax) return on invested capital (ROIC) before they consider this a healthy business.

Even at $100 million in gross operating profit, you still have to subtract for interest expenses (think core fleet and inventory), taxes, and other non-operating expenses. That'll drive the net number down close to zero...and probably negative. Please see my earlier post in this thread about the impact of shares sales accounting on the financial reporting in financials.

 

[hammer2]

1+1 = 3 Unless it's women then 1+1= 0 in the end.

 

[gunfyter]

I'd like to do business with you! It's the return on the cash you invest that matters, nothing else. Think about that...if you want to GET a lot of money back on your investment, then you'll need to INVEST (and put at risk) a lot. With a more profitable business, you'll need to put in less to get the same amount..

OK lets go.


Give me 3 billion of YOUR money.... and I will keep 3 %


I will not put in anything. MY Return is INFINITE... since I risk nothing.

Thats what we do here. The money is Revenue $3B in revenue and we kkep 3%. Thats the $100M.

 

[gunfyter]

Interesting.... you might want to check the news. Not even the US Government will loan money for 3% anymore. They currently loan money at 5.25%....

Kind of shoots holes in your volume argument.

What shoots holes in your argument is your Ignorance of how the things you read in the news works.

The government does not loan money. The federal Reserve does. The government BORROWS money.

And the Federal reserve (a private corporation) is taking NO RISK. They money they lend is created out of nothing.

We are the same thing as a Bank. Except instead of the depositors depositing their Money... They deposit AirPlanes. Managed CORRECTLY ... we make money off of Other Peoples Assets.

This is what the great one means when he says the naysayers don't understand our business. Our competitors are Manufacturers and airlines that think we are in the Aviation business. They do not know We are a Bank.

Its what Uncle Warren means when he says We have DUMB COMPETITORS.


The MAFIA made millions taking just 2.5% on the Bets of people betting on Football every week. They make money on the VOLUME of the wagering. It does not matter if the Redskins win or the Cowboys win the game. They gat 2.5% of the total dollars wagered.

But really the return is INFINITE because the Mafia Bookies are risking none of their own money.