NetJets TA fails miserably

[Whirlwind]

You have proved nothing.

In your eyes perhaps... But it remains a fact that AA has a 80% load factor and is still losing money...

The only thing you have proved is that you have a myopic view of the airline industry of which you are not a part of. You forgot things like loyalty to a carrier and airline miles. A person with a few million miles on AA is not going to fly on AWA just becuase the cost is a little less.

Like I said, some groups of people would still fly on American. That doesn't make my point that the load factors would be down any less true.

 

[Whirlwind]

Whirlwind a voice of reason in a sea "What is in it for me" The old supply and demand keeps getting in the way want we would like the industry to be like.

Yea, that darn old free market thing kicking in...

A friend of mine flies for one of the small regionals, making about $1K per month. They are hiring and I was offered an interview which I turned down. I'm making twice that a month now flying corportate.

I don't knock those who would fly such jobs as my friend, that is their choice, but as long as the pay is that bad, I have no interest in doing so. If more pilots felt like I did, the pay would go up due to a lack of supply.

Fly safe!

 

[Full of LUV]

Which one?

Which one? The little one? It doesn't surprise me anywhere near as much as the idea of them running for re-election

The little one, I thought it was the gimp? Or was it the transgendered metrosexual?

 

[Lord Wakefield]

The little one, I thought it was the gimp? Or was it the transgendered (sic) metrosexual?

The Donny Osmond fancy boy with the expensive hand creams? Is that the guy that lives with his parents?

 

[Publishers]

First, we will all see how great this works out. At this point, it has done nothing.

As to the management comments above, management does not work for the workers nor was that ever the objective. They are not there to serve the workers, they are there to serve the owners, either the public in a public company or individuals in a private one. It is the owners that they have to satisfy.

Netjets was created through very clever financing plans, a sense of the market, and a new an innovative approach to selling the product. Without them thinking up all this, you would not have jobs in the first place, nor will you continue them if they do not manage to keep the company ahead of the power curve.

You seem flush with the success of voting this down but what have you accomplished? The company mize well sit back and wait and see if you ever even figure out who is leading you.

 

[kingtut]

Publishers, yes, time will tell. The company is in the cat-bird's seat. I mean, a pilot labor contract is still in place. Several concurrent events are underway: MEC Elections, Petition to remove the IBT, 284 local elections, and, the big one, Presidental elections. The fact is, if the White House changes hands, the plight of organized labor may change.

Given the outcome of the aforementioned events, the company will do well to wait and wait they will. No doubt a new MEC will be elected. That done, it will take them time to organize themselves and press on. How fast and hard the new MEC presses will depend in total on how interested the company is in talking.

 

[El Chupacabra]

As to the management comments above, management does not work for the workers nor was that ever the objective. They are not there to serve the workers, they are there to serve the owners, either the public in a public company or individuals in a private one. It is the owners that they have to satisfy.

Yes Mastah. You obviously have not read NUTZ.

If you want performance from your people... you look to their interests first. Thats what makes money for the company.

 

[njwingman]

Publishers and King Tut:

As long I continue to fly for NetJets, I have two choices: fly under the current contract with its provisions or fly under a new contract with its provisions that is voted in. Given that simple choice, my vote went to continue to fly under the current contract. It was that simple of a choice. And 1439 other pilots agreed with me. What the future brings, not even wise men such as yourselves know. But I made the decision I needed to make on the day I needed to make it.

May you have the success you desire in all your future endeavors, gentlemen. Regards --

 

[kingtut]

njwingman, nothing wrong with your decision and it certainly was your decision to make. And, as with all decisions you make, you must live with the circumstances and realities of that decision. If it goes well, then good on ya, if it goes bad, Oh Well. There will be other decisions to make but not soon.

 

[Publishers]

I was certainly not saying that you do not look after the interest of your people but there should be no doubt as to who managers are serving.

you accomplish the results by utilizing the tools, resources, and people at your disposal through efficiency and motivation. Herb Kelleher was the best at doing those things. Your trouble is being a strong union company in an industry game that is strong non union. I have not seen that work very well.

 

[Dangerkitty]

AA Pilot --

Don't know if you noticed or not, but you're in the Fractional part of this message board. Majors are in another section. Maybe there are pilots over there that can give you answers you like. Regards --

Thanks for the tip but why dont you go to the beginning of the thread and see who directed this discussion to where I decided to comment. It wasn't me.

 

[njwingman]

I was certainly not saying that you do not look after the interest of your people but there should be no doubt as to who managers are serving.

you accomplish the results by utilizing the tools, resources, and people at your disposal through efficiency and motivation. Herb Kelleher was the best at doing those things. Your trouble is being a strong union company in an industry game that is strong non union. I have not seen that work very well.

I have no doubt who NetJets management is serving: Warren Buffett and Berkshire Hathaway shareholders. However, I believe it was Herb Kelleher who said he solved that business conundrum of who comes first: the shareholder, the customer or the employees? by subscribing to the business practice of: Shareholders will be satisfied if there are satisfied customers and customers will be satisfied if there are satisfied employees. So far in my tenure at NetJets I can't hear anything management is saying about resources, efficiency and motivation for all the noise their actions are making.

As for the union/industry comment, if NetJets controls 75% of the fractional market, wouldn't that make the industry strongly unionized?

 

[njwingman]

njwingman, nothing wrong with your decision and it certainly was your decision to make. And, as with all decisions you make, you must live with the circumstances and realities of that decision. If it goes well, then good on ya, if it goes bad, Oh Well. There will be other decisions to make but not soon.

That's just it. With the choice I had and the decision I made, I don't have to worry about anything going well or badly or even when or if I might have to make another decision. I am willing to live with the current contract until----------------it sure beats what I was offered under the new contract. Nothing makes a crappy contract look good to you until you see a crappier one. That was the choice. I've got the better deal. Picture me smilin'. Regards --

 

[Publishers]

part right

I have no doubt who NetJets management is serving: Warren Buffett and Berkshire Hathaway shareholders. However, I believe it was Herb Kelleher who said he solved that business conundrum of who comes first: the shareholder, the customer or the employees? by subscribing to the business practice of: Shareholders will be satisfied if there are satisfied customers and customers will be satisfied if there are satisfied employees. So far in my tenure at NetJets I can't hear anything management is saying about resources, efficiency and motivation for all the noise their actions are making.

As for the union/industry comment, if NetJets controls 75% of the fractional market, wouldn't that make the industry strongly unionized?

Herb valued employees satisfaction with job as to their role in the process but it would be a bit simplific to say one started there. As to the 75% comment, Netjets competition is only part other fractionals. They also compete with every charter company and every corporate flight operation. It is a very complex model that needs constant tweaking. I always thought the problem was going to be the 5 year new equipment stategy as with their intial success, they would be pumping quite a few high time used aircraft into the market. If that in turn depressed the used market, their original estimates of residual value would not work and the customer would be upset.

This has happened to a small extent already with some customers upset that the residual has not held up. On the service side, they have made some strong committments to the customer. To meet that service level means some extrodinary costs to provide the promised service. No matter how the TA comes out, the likelyhood is a higher cost to Netjets and one they will try and pass along to a customer base somewhat stressed by the cost per hour they end up paying. That may not be a big deal to Tiger Woods but some of the smaller companies that they are trying to get on board, it will be.

 

[Ace-of-the-Base]

Tiger

I hear Tiger get his NetJet flying for free as a trade for them using his name and image. I wonder if I could get that deal...

It's great that you guys beat the sh*tty T/A. I still think you under estimate your power against a company that is probably scared to death of their customers getting wind of some sort of slow down, sick out, etc. Get organized and you'll have them by the b*lls. I'm tired of my boss saying "you're making twice as much as the NetJet pilots and flying half as much...what are you asking for a raise for...)

In one way or another, we're all in this together.

Ace

 

[njwingman]

Herb valued employees satisfaction with job as to their role in the process but it would be a bit simplific to say one started there. As to the 75% comment, Netjets competition is only part other fractionals. They also compete with every charter company and every corporate flight operation. It is a very complex model that needs constant tweaking. I always thought the problem was going to be the 5 year new equipment stategy as with their intial success, they would be pumping quite a few high time used aircraft into the market. If that in turn depressed the used market, their original estimates of residual value would not work and the customer would be upset.

This has happened to a small extent already with some customers upset that the residual has not held up. On the service side, they have made some strong committments to the customer. To meet that service level means some extrodinary costs to provide the promised service. No matter how the TA comes out, the likelyhood is a higher cost to Netjets and one they will try and pass along to a customer base somewhat stressed by the cost per hour they end up paying. That may not be a big deal to Tiger Woods but some of the smaller companies that they are trying to get on board, it will be.

Publishers --

I would agree about the used aircraft and residual values. I don’t know if you are aware, but NJA does offer ownership in their "used" aircraft at advertised rates approximately 15% below the new aircraft ownership numbers. So it seems they are in the used aircraft market through NetJet Sales, Inc. in order to keep those residual values up. And the Marquis program is probably helping them keep those used aircraft utilized until they are marketed. As you say, they are constantly tweaking. The problem is they are creating a vicious circle for themselves as they run the hours up on the owners’ aircraft utilizing it for Marquis business, hurting the residual value for when a particular owner’s contract is up for renewal. Don’t know how that is going to be tweaked. Especially when business is growing, not stagnant or shrinking.

You seem like a man who knows the numbers. Putting aside the purchase and sale of the aircraft itself, and relying only on the hard income of monthly management fees and occupied flight hour fees, and using the hypothetical number of $208 million annual income in a particular fleet of NetJets aircraft, what would you project your pilot costs to be in order to operate that fleet? Just curious to have your opinion.

 

[Publishers]

/it would be really hard for me to come up with a number that had any significance. First of all, it is common knowledge that they need the purchase and sale to even be in the business. Therefore to throw them out would be equally misleading.

The problem here is that one needs to come up with an occupied hour crew cost. In a typical corporate operation, there are very few unoccupied hours relative to the total operation. Therefore when Joe customer is looking at Netjets or one of the other options, he is going to figure out what it cost him to do his own versus Netjets fees. What we would have to do is take all that dead head flying around positioning and add the crew costs from that to the hourly cost for occupied trips. In short, both crew costs over the occupied hours.

Forever ago if my memory serves me, we had a crew cost component of about 26% of the total hourly operating. That included salaries, benefits, per diem, etc. We had little or no unoccupied flight hours so every hour was charged, either to parent or a charter customer. That was also relative to our aircraft expense and utilization where 1/3 was fuel, 1/3 maintenance and depreciation, and the balance G&A and profit.

All of this is complex and symbiotic stuff so it is not cut and dried. My Challenger friend has roughly $150,000 in crew cost per year salaries and benefits. He flies about 438 hours for a crew cost in the $330 per operated hour for an aircraft that goes for $3500 per hour.

 

[G100driver]

PER CREW or per crew member?

 

[Publishers]

The $150k is for the crew and benefits. $80k and $45k plus benefits.

 

[njwingman]

/it would be really hard for me to come up with a number that had any significance. First of all, it is common knowledge that they need the purchase and sale to even be in the business. Therefore to throw them out would be equally misleading.

A. Okay, I'll throw it in. No problem here with figuring in every piece of the pie.

The problem here is that one needs to come up with an occupied hour crew cost. In a typical corporate operation, there are very few unoccupied hours relative to the total operation. Therefore when Joe customer is looking at Netjets or one of the other options, he is going to figure out what it cost him to do his own versus Netjets fees. What we would have to do is take all that dead head flying around positioning and add the crew costs from that to the hourly cost for occupied trips. In short, both crew costs over the occupied hours.

A. That's the way I look at the numbers also. More efficient in revenue hours, more money for the business.

Forever ago if my memory serves me, we had a crew cost component of about 26% of the total hourly operating. That included salaries, benefits, per diem, etc. We had little or no unoccupied flight hours so every hour was charged, either to parent or a charter customer. That was also relative to our aircraft expense and utilization where 1/3 was fuel, 1/3 maintenance and depreciation, and the balance G&A and profit.

A. We agree on this figure. In the mid- to late 90s in a past life we were figuring 30%. So I guess you would agree that 15-16% is low.

All of this is complex and symbiotic stuff so it is not cut and dried. My Challenger friend has roughly $150,000 in crew cost per year salaries and benefits. He flies about 438 hours for a crew cost in the $330 per operated hour for an aircraft that goes for $3500 per hour.

A. Nice guy, I'm sure I must know him.

You and I basically agree on the numbers and the way they work. Just comes down to whether you're pitching or catching. Can't we all just get along?

Regards ....

 

[Publishers]

Well in the real time example, you have a 10% figure relative to the hourly ops cost.

In my history from above, fuel costs were a relatively low number when combined with the maintenance capabilities we had you, your 2/3 's were low and the pilot cost high.

Today, fuel costs are up and a larger portion, insurance costs are a more significant %, maintenance depending on age of aircraft and type can be very costly, and the pilot costs less as a percentage due to the other factors. That is why the percentage game is not very effective in doing analysis all the time that is really comparative.

Now take the Challenger crew above. For the owner, they only fly 300 hours per year. The balance is charter. In terms of dollars, the owner is paying out the same money with or without charter. The question is whether the costs are spread over the 300 or the 438. Over the 438, his crew costs have dropped, plus, he is generating revenue on the aircraft - a double win.

It is this kind of calculation that people look at to determine what it would cost them versus going with Netjets. You can get whatever you want to get but in the real world, this challenger flies when the boss wants to go, where he wants to go, and there is no overtime, no fixed days off, no staff to do Jepps, no much of any work scope.

To try and translate this typical flight operation into a union organized public company is difficult at best. You want airline type benefits along with corporate type pay, and really are a charter company. I think your work rules more than the money are going to be detrimental to the future model.

 

[Starman]

The $150k is for the crew and benefits. $80k and $45k plus benefits.

I'm hoping that's per pilot.

 

[njwingman]

So, I guess in summary, Publishers, you are saying that the numbers you and I both know so well don't necessarily fit in the fractional house of cards. I agree.

You are saying the fractional business doesn't mirror airlines well, and it doesn't mirror the charter business well. I agree.

So, here we are, you on the sidelines watching and perhaps somewhat threatened by it if I've got the picture right; me in the midst of it all with a couple thousand other guys betting our futures on it, blazing the trail for the future. The Lewises and Clarks of the skies.

Maybe when it all shakes out, we both will know whether or not this business concept was genius or fatally flawed. We just made our bets on opposite sides of the table. Either way, it will be exciting. And hey, I can always go back to corporate/charter, huh?

Regards --

 

[Publishers]

They work as long as you can make it up somewhere else in the program. If sales of fractions slowed appreciably, your dead.

 

[njwingman]

If sales of fractions slowed appreciably, your dead.

And that, Publishers, is the truest thing either one of us has said in this exchange of ideas. Enjoyed it --thanks.