NetJets Recalls

[jetlag7]

You know, reading your post I starting thinking about the last twenty years in business aviation.

In 1992/1993 the industry was really in the tank, charter was in its infancy for most people, nobody had heard of fractional ownership, and Gulfstream had to be saved from bankruptcy by Ted Forstmann. We got on a roll in the 1997-2000 years with the dot com craze...charter was going nuts, fractional were reeling them in, and the manufacturers had wait lists. That busted out in 2000 and things really starting to go down hill and 9/11 made it worst. A rebound occurred in the 2004-2007 time frame due to the housing market which spurred on Wall Street and we had a repeat of the late 1990's.

Economic bubbles have driven demand for private aviation and if you count the good years versus the bad or mediocre, we have had approximately 6 good years and 14 so so years.

The point of the rambling is that this is really a lousy business to be in. Very few people can afford our services and demand usually occurs when we are riding a phantom horse called a bubble. We are facing a mountain of foreclosures that are coming in the next two years (more than the last three years combined), unemployment is still 8.2% and that figure doesn't take into account the fact that many people that are working, are making less than they did 3-4 years ago. A pound of butter is closing in on $5 (up almost 50% in 4 years), lunch at Wendy's is $7, and a gin and tonic is $10 in most places (25% of the customers aren't making their mortgage payments)...we just don't have a lot of things going our way. .

While we will get thru this because we are resilient, 2014 would have to be viewed as a reach for any real recovery in private aviation...the overall economy will be better and aviation will have to wait awhile longer.

I fully expect to hear much more of this all summer long and early next fall (or at least starting around May 6th...)

Thanks for the heads-up Gret!

 

[gret]

Don't know the significance of May 6th...sorry

 

[fly4funcrj]

Before I was hired into Netjets, I imagined a handful of people that could afford that kind of service. Seriously, after working here, I am still amazed at how many people (and companies) can and do afford this type of service. I may be naive, but it does seem like the rich are getting richer.

As far as the pilot attrition, it seems that we are losing pilots, but only because they are passing (thoughts and prayers to their loved ones).

 

[johnsonrod]

Before I was hired into Netjets, I imagined a handful of people that could afford that kind of service. Seriously, after working here, I am still amazed at how many people (and companies) can and do afford this type of service. I may be naive, but it does seem like the rich are getting richer.

As far as the pilot attrition, it seems that we are losing pilots, but only because they are passing (thoughts and prayers to their loved ones).

The rich may be getting richer (shuttle cash off to offshore accounts), the number of poor people are growing exponentially, and the middle class is slowing disappearing thanks to Obama and the never-ending recession. But at least we will have Obamacare!!!!!!!!

 

[PDTGIMP]

Hey guys!

Honestly, the model is not broken---but it IS overdone---too many players for too small a pie---the BIGGEST worry is not unions, pilots, economy----and I wouldn't have believed it till I started working in it---it is the IRS. Companies that make money can write off private air travel as active income---get rid of those perks and this industry is dead. Having worked in 121, 91(k) and currently 135---I can safely say--charter/management/fractional is here to stay---BUT,,,,BIG BUT....TOO many players---it is a small part of the world---that is why Netjets wins---ECONOMIES OF SCALE for purchasing, financing, labor relations, etc---the small players will not make it---it will be Netjets, Flight Options and, maybe, Flexjet---the rest might make it---but only as a 135 on demand carrier--like a TMC, DPJ, Xo---they fill a void--and Citationair and the smaller players will most likely need to adapt that model or die----hence why Citationair is changing--blame uinons all you want--BUT at the end of the day---they would've ended up there either way--overcapacity-too many players for too little share--they need to be more 135 focused and if they execute they will become a smaller 135 operator and survive or be bought OR buy someone else----

 

[BentOver]

Hey guys!

Honestly, the model is not broken---I agree


it is the IRS. Companies that make money can write off private air travel as active income---get rid of those perks and this industry is dead. ---

Not sure I've seen anything, but is there anything on the table in Washington that would make anyone feel that companies will not be able to write off transportation expenses? As far as I know that is and has always been an easy deduction. Heck, companies can write off sales dinners and order $100 lobster plates...

I agree, take away the benefits of partial ownership, and the fractional is DOA.

 

[gret]

Meals and entertainment expenses are already 50% disallowed.

Expenses, including depreciation, are disallowed for any personal use flights.

The deductions have been severely limited over the past 5-10 years.

 

[BentOver]

Meals and entertainment expenses are already 50% disallowed.

Expenses, including depreciation, are disallowed for any personal use flights.

The deductions have been severely limited over the past 5-10 years.

And netjets had a booming business over the within the last ten years. Point being, is there anything on the table that is supposed to change the way things are done now?

 

[gret]

Not sure how things will work out, but the headwinds don't appear to be too good-

IRS Countersues NetJets, Seeking $367M in Excise Taxes

http://www.jetoptionsjetcharter.com...tersues-netjets-seeking-367m-in-excise-taxes/

NetJets Sues IRS Over $642.7M Tax Bill

http://www.ainonline.com/aviation-news/ainalerts/2011-11-17/netjets-sues-irs-over-6427m-tax-bill

FAA Modernization and Reform Act of 2012 SUMMARY:

The final bill makes changes to the tax structure for Part 91 subpart K (fractional) flights by treating such flights as non-commercial. Fractional flights will now be subject to a 14.1 cents per gallon fuel surtax on the existing GA fuel tax rather than the previous commercial taxes. The fractional ownership program manager—rather than fractional owners—is the party liable for the tax.

http://www.nbaa.org/advocacy/issues...the-2012-FAA-Modernization-and-Reform-Act.pdf​

 

[BentOver]

Not sure how things will work out, but the headwinds don't appear to be too good-

IRS Countersues NetJets, Seeking $367M in Excise Taxes

http://www.jetoptionsjetcharter.com...tersues-netjets-seeking-367m-in-excise-taxes/

NetJets Sues IRS Over $642.7M Tax Bill

http://www.ainonline.com/aviation-news/ainalerts/2011-11-17/netjets-sues-irs-over-6427m-tax-bill

FAA Modernization and Reform Act of 2012 SUMMARY:

The final bill makes changes to the tax structure for Part 91 subpart K (fractional) flights by treating such flights as non-commercial. Fractional flights will now be subject to a 14.1 cents per gallon fuel surtax on the existing GA fuel tax rather than the previous commercial taxes. The fractional ownership program manager—rather than fractional owners—is the party liable for the tax.

http://www.nbaa.org/advocacy/issues...the-2012-FAA-Modernization-and-Reform-Act.pdf
​

This is semi-old news yet to be decided...The way I read those IRS lawsuits is they want pt. 91K to be charged like Pt. 121. Taxes on fuel etc....

What I am referring to is the write off/depreciation capabilities that fractional ownership provides. Is that set to be changed in the future?