NetJets Profits

[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.