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.

 

[FamilyGuy]

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.

Splitting hairs now?

The Federal Reserve is the US government.

Tell you what...Since it appears you are unwilling to give up on a losing position, why don't you give me all your money, I'll give you a 3% rate of return, and then I'll turn around and invest your funds here:

http://www.smithbarney.com/products_services/fixed_income/cds/cdrates.html

I'm sure Warren Buffett has better choices, but this should be enough to show you the error of your ways....

 

[FamilyGuy]

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.

God, Gun...You make this so easy...

The first fallacy in your line of thinking is that you are assuming we get the money from the owners before we buy the planes....simply doesn't work that way.

We have to order, and pay for aircraft, well in advance of the sales to the owners.

Think about it....we have to order aircraft three years in advance (minimum) and then hope the economy will support the sales of those aircraft when they are delivered.

Do you honestly think this happens with no risk?

 

[Number$Cruncher]

OK lets go.
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.

But "you" already have...starting with $800 million or so when you bought the company. PLUS, all of the other cash that has been required to fund the losses in the meantime, PLUS all of the investment that has been required in core fleet, facilities, aircraft, etc. Not all of it that are sunk costs, granted, but the notion of having no risk is...well, just represent an udnerstanding of corporate finance.

Well over $1 billion has been invested by BRH in the company, much of it cash. The fundamental thing you're forgetting (a common mistake) is the "opportunity cost" of investing in NetJets. This is a very REAL cost, given BRH's vast amount of other readily available other options.

Let's agree on this: fractional pilots, NetJets included, are vitally important in the future success of their companies.

 

[gunfyter]

The Federal Reserve is the US government
​

FALSE.


The Federal Reserve is a monopoly regulated by the government much like your local Power Company. The Power Company creates Energy ... and the Fed creates money. Fractional Reserve Banking

You used the number $3Billion in revenues compared to $100M in profit to come up with your 3%. BUT the $3Billion is NOT what NJ has at Risk. (*You mean if we lower our revenues we have LESS at Risk? )

This would be like saying VALERO ENERGY (VLO) which had revenues of $87B last year so they had $87B at risk.

What BRK has at risk is a much lower number. Like probably 1B. So $100M would represent a 10% return.

 

[FamilyGuy]

The Federal Reserve is the US government​

FALSE.
The Federal Reserve is a monopoly regulated by the government much like your local Power Company. The Power Company creates Energy ... and the Fed creates money.

Taken from the Federal Reserve website:
http://www.federalreserve.gov/generalinfo/faq/faqfrs.htm

What is the Federal Reserve System?
The Federal Reserve System, often referred to as the Federal Reserve or simply "the Fed," is the central bank of the United States. It was created by Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role has evolved and expanded.

When was the Federal Reserve created?
The Federal Reserve was created on December 23, 1913, with the signing of the Federal Reserve Act by President Woodrow Wilson. The act had been drafted as House Resolution 7837 by Representative Carter Glass (D-VA), incoming chairman of the House Banking and Currency Committee.

How is the Federal Reserve System structured?
The Federal Reserve System has a structure designed by Congress to give it a broad perspective on the economy and on economic activity in all parts of the nation. It is a federal system, composed basically of a central, governmental agency--the Board of Governors--in Washington, D.C., and twelve regional Federal Reserve Banks, located in major cities throughout the nation. These components share responsibility for supervising and regulating certain financial institutions and activities; for providing banking services to depository institutions and to the federal government; and for ensuring that consumers receive adequate information and fair treatment in their business with the banking system.

Who owns the Federal Reserve?
The Federal Reserve System is not "owned" by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects.


So in summary, the Federal Reserve was created by Congress, has oversight by Congress, is headed up by a governmental agency, and is self-described on their website as being an independent entity WITHIN the government.
Hence my description that the Federal Reserve is part of the US Government.

Fractional Reserve Banking​

Hmmm... so now you're quoting the dean of the Austrian School of Economics.... What's wrong, couldn't you find someone from the University of Chicago, or MIT, or Harvard, or Wharton, or somewhere else to support your claims?

You failed to mention that this guy is also the leading proponent of Anarcho-capitalism. http://en.wikipedia.org/wiki/Anarcho-capitalism

Since you so readily brought this guy forth as a credible source, do you also believe, as he does, that the free market is better able to provide for the nation's defense?

I guess I'm surprised that such an ardent supporter of unions would be reading and quoting someone that advocates free, unfettered capitalism.

You used the number $3Billion in revenues compared to $100M in profit to come up with your 3%. BUT the $3Billion is NOT what NJ has at Risk. (*You mean if we lower our revenues we have LESS at Risk? )

This would be like saying VALERO ENERGY (VLO) which had revenues of $87B last year so they had $87B at risk.

What BRK has at risk is a much lower number. Like probably 1B. So $100M would represent a 10% return.

Net Profit divided by Total Revenue is the GAAP standard for measuring profitability. 'Money at risk' has nothing to do with it.

Somehow I don't think you would care for your own definition of profitability if the company tried to use it in the next round of negotiations...."Since you have nothing at risk, our proposed raise of $1 per hour equals an infinite return for you...."