NetJets TA fails miserably

[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 ....