NYT: "Market for Corporate Jets Goes Into Free Fall"

F/O

Smells like....
Joined
Mar 7, 2002
Posts
485
Total Time
8000
Santulli starts to get a little heartburn....

==============================================

http://www.nytimes.com/2008/12/25/business/25jets.html?_r=2&hp

Market for Corporate Jets Goes Into Free Fall

By GERALDINE FABRIKANT
Maybe General Motors should throw in a fleet of Cadillacs.
The automaker is dumping its corporate jets into what some participants say is the worst market they have ever seen.
Just seven months ago, hundreds of mega-millionaires, including Ralph Lauren and David Geffen, were elbowing one another in the lineup to buy a $60 million Gulfstream G650, which was not expected to hit runways until 2012.
It did not matter that $500,000 had to be wired to Gulfstream’s account at a Midwest branch of JPMorgan Chase at exactly 12:01 a.m. on April 15, or that bidders who secured a place in the waiting line could not sell their rights if they changed their minds, according to one bidder.
Some eager moguls even tried to improve their chances of getting a jet quicker by opening accounts at Chase’s Midwest office. Among high-ticket status symbols, “me and my brand new jet” was it.
But that was another era — before the credit crisis and before billions of dollars in corporate and individual wealth were lost.
“The jet market stinks,” said Richard Santulli, the chief executive of Netjets, the private jet company owned by Berkshire Hathaway, the holding company led by Warren E. Buffett.
To control costs, companies including Citigroup and Time Warner are selling their jets. Alcatel-Lucent has allowed leases on two jets to expire without renewing them and has put its third jet up for sale.
And the public relations fiasco that engulfed the chief executives of Detroit’s automakers when they flew to Washington on company planes to seek a government bailout has underscored how inappropriate such travel can seem in this recession.
General Motors, which leases seven planes, put the majority of them on the market before the government said it must do so as a condition of government assistance. The automaker has also closed its air transportation services unit, which had 49 employees.
“We could not justify an in-house aircraft operation,” a G.M. spokesman, Tom Wilkinson, said. “We are negotiating to transfer the remaining planes to another operator. Ford too has shut down its flight department.”
Jet brokers, who normally have a worldwide clientele, say the market has constricted abroad in recent months as well.
“Our inventory is up dramatically, and demand is way down,” said Josh Messinger, of J. Messinger Corporate Jet Sales, a jet broker. “The decline is particularly pronounced for those who bought more recently because prices had soared so much.”
“I spent a week in Dubai, and the front page of the paper there had articles every day about their economy having issues due to real estate issues,” he said.
Mr. Santulli said that the Russians had been big buyers of jets.
“But the fall of the Russian stock market has had a huge impact,” he said. “The Indian stock market stinks, and the dollar has gotten stronger, which hurts airplane sales.”
Because jets are priced in dollars, they become more expensive for foreigners as the dollar gets stronger.
Among jets, the large-cabin, long-range segment of the market is suffering the most, said Bill Quinn, director of aircraft sales and acquisitions at Cerretani Aviation, based in Boulder, Colo. That includes planes from Gulfstream, Bombardier and Falcon.
Carrying costs are high. A Gulfstream G550 costs about $47 million. Though expenses can vary by state, one mogul’s business manager estimated that annual costs run about $1.3 million, including $500,000 for property tax and $400,000 for pilots and stewards. Typical operating costs are more than $2,000 an hour in the air, he said.
The corporate side of the business is particularly vulnerable because of public scrutiny. “They are not going to do employee layoffs and keep the jets,” said Mary Hevener, a tax adviser who specializes in executive compensation at Morgan Lewis & Bockius.
Besides, Congress stripped away the deductibility of personal travel for executives in 2004 by allowing companies to deduct from taxes only the rough amount of a first-class ticket, far less than private jet travel costs.
Corporate chiefs concerned about public scrutiny are more inclined to look for alternatives than to return to the airlines. Some are examining whether they should take delivery of planes already ordered. One company had been looking to upgrade its two planes. “Now they are weighing whether or not to buy new planes or keep what they have,” Mr. Quinn said.
Some are downsizing. “Some of these guys just move the deck chairs around,” he said. “They get rid of the big planes and go to fractional ownership, or they go to charter, or they come back into the marketplace with a leased plane,” he said.
But every part of the private jet industry has been affected. Netjets lets people buy a fractional ownership in planes, and it sells Marquis jet cards that give customers access to the fleet in 25-hour increments. Those businesses, too, are seeing a slowdown.
“People have lost a lot of money, and are careful about how they spend it,” Mr. Santulli said.
“I have never seen it like this,” said Mike Silvestri, the chief executive of Flight Options, which sells shares in jets as well as plans that cover a fixed number of hours a year of private jet use. “Customers are just not flying as much.” Some customers are stretching out the hours bought for a single year over a longer period.
Flight Options has laid off 134 people, including 104 pilots, and hopes it will be able to bring them back.
Mr. Santulli said that the jet market usually picks up three months after the stock market has reached a bottom. There is no indication of an uptick yet.
 
Last edited:

doh

Jump seat shrink
Joined
Aug 26, 2003
Posts
4,017
Total Time
48 yrs
I can't say this is shocking. It's sad, but not unexpected.
 

B19 Flyer

....
Joined
May 8, 2006
Posts
1,595
Total Time
....
Industry Leading Contract my butt....

Santulli starts to get a little heartburn....

==============================================

http://www.nytimes.com/2008/12/25/business/25jets.html?_r=2&hp

Market for Corporate Jets Goes Into Free Fall

By GERALDINE FABRIKANT
Maybe General Motors should throw in a fleet of Cadillacs.
The automaker is dumping its corporate jets into what some participants say is the worst market they have ever seen.
Just seven months ago, hundreds of mega-millionaires, including Ralph Lauren and David Geffen, were elbowing one another in the lineup to buy a $60 million Gulfstream G650, which was not expected to hit runways until 2012.
It did not matter that $500,000 had to be wired to Gulfstream’s account at a Midwest branch of JPMorgan Chase at exactly 12:01 a.m. on April 15, or that bidders who secured a place in the waiting line could not sell their rights if they changed their minds, according to one bidder.
Some eager moguls even tried to improve their chances of getting a jet quicker by opening accounts at Chase’s Midwest office. Among high-ticket status symbols, “me and my brand new jet” was it.
But that was another era — before the credit crisis and before billions of dollars in corporate and individual wealth were lost.
“The jet market stinks,” said Richard Santulli, the chief executive of Netjets, the private jet company owned by Berkshire Hathaway, the holding company led by Warren E. Buffett.
To control costs, companies including Citigroup and Time Warner are selling their jets. Alcatel-Lucent has allowed leases on two jets to expire without renewing them and has put its third jet up for sale.
And the public relations fiasco that engulfed the chief executives of Detroit’s automakers when they flew to Washington on company planes to seek a government bailout has underscored how inappropriate such travel can seem in this recession.
General Motors, which leases seven planes, put the majority of them on the market before the government said it must do so as a condition of government assistance. The automaker has also closed its air transportation services unit, which had 49 employees.
“We could not justify an in-house aircraft operation,” a G.M. spokesman, Tom Wilkinson, said. “We are negotiating to transfer the remaining planes to another operator. Ford too has shut down its flight department.”
Jet brokers, who normally have a worldwide clientele, say the market has constricted abroad in recent months as well.
“Our inventory is up dramatically, and demand is way down,” said Josh Messinger, of J. Messinger Corporate Jet Sales, a jet broker. “The decline is particularly pronounced for those who bought more recently because prices had soared so much.”
“I spent a week in Dubai, and the front page of the paper there had articles every day about their economy having issues due to real estate issues,” he said.
Mr. Santulli said that the Russians had been big buyers of jets.
“But the fall of the Russian stock market has had a huge impact,” he said. “The Indian stock market stinks, and the dollar has gotten stronger, which hurts airplane sales.”
Because jets are priced in dollars, they become more expensive for foreigners as the dollar gets stronger.
Among jets, the large-cabin, long-range segment of the market is suffering the most, said Bill Quinn, director of aircraft sales and acquisitions at Cerretani Aviation, based in Boulder, Colo. That includes planes from Gulfstream, Bombardier and Falcon.
Carrying costs are high. A Gulfstream G550 costs about $47 million. Though expenses can vary by state, one mogul’s business manager estimated that annual costs run about $1.3 million, including $500,000 for property tax and $400,000 for pilots and stewards. Typical operating costs are more than $2,000 an hour in the air, he said.
The corporate side of the business is particularly vulnerable because of public scrutiny. “They are not going to do employee layoffs and keep the jets,” said Mary Hevener, a tax adviser who specializes in executive compensation at Morgan Lewis & Bockius.
Besides, Congress stripped away the deductibility of personal travel for executives in 2004 by allowing companies to deduct from taxes only the rough amount of a first-class ticket, far less than private jet travel costs.
Corporate chiefs concerned about public scrutiny are more inclined to look for alternatives than to return to the airlines. Some are examining whether they should take delivery of planes already ordered. One company had been looking to upgrade its two planes. “Now they are weighing whether or not to buy new planes or keep what they have,” Mr. Quinn said.
Some are downsizing. “Some of these guys just move the deck chairs around,” he said. “They get rid of the big planes and go to fractional ownership, or they go to charter, or they come back into the marketplace with a leased plane,” he said.
But every part of the private jet industry has been affected. Netjets lets people buy a fractional ownership in planes, and it sells Marquis jet cards that give customers access to the fleet in 25-hour increments. Those businesses, too, are seeing a slowdown.
“People have lost a lot of money, and are careful about how they spend it,” Mr. Santulli said.
“I have never seen it like this,” said Mike Silvestri, the chief executive of Flight Options, which sells shares in jets as well as plans that cover a fixed number of hours a year of private jet use. “Customers are just not flying as much.” Some customers are stretching out the hours bought for a single year over a longer period.
Flight Options has laid off 134 people, including 104 pilots, and hopes it will be able to bring them back.
Mr. Santulli said that the jet market usually picks up three months after the stock market has reached a bottom. There is no indication of an uptick yet.

Actually, Santulli is getting heartburn, but the future heart attack is going to come when NJASAP realizes that the "industry leading contract" isn't going to stand up by the end of next year.

This is an awful lot like 2001 and 2002 when United, Delta and AA all had "industry leading contracts" and they all collapsed back to reality (and actually much worse)

All of you have said this couldn't happen, and for months and months I said it could. You guys asked for too much, got too much and now you and the rest of the company are going to pay the price...
 

av8trinabarrel

Well-known member
Joined
Oct 22, 2006
Posts
258
Total Time
uhhhh!
More insightful infromation from the # 1 graduate from the Orsnstein school of killing aviation careers. You may be right about RTS having heartburn, but the man knows numbers a helluva lot better than you and your cronies. I will go to war with RTS anytime, especially after the way I have been treated here my first year. God bless all those you have put out of work..Karma is a bit%h!;)
 

NorskAir

Well-known member
Joined
Dec 3, 2001
Posts
49
Total Time
10k+
So you are saying the Netjets contract caused the financial markets to tumble???

Actually, Santulli is getting heartburn, but the future heart attack is going to come when NJASAP realizes that the "industry leading contract" isn't going to stand up by the end of next year.

This is an awful lot like 2001 and 2002 when United, Delta and AA all had "industry leading contracts" and they all collapsed back to reality (and actually much worse)

All of you have said this couldn't happen, and for months and months I said it could. You guys asked for too much, got too much and now you and the rest of the company are going to pay the price...
 

B19 Flyer

....
Joined
May 8, 2006
Posts
1,595
Total Time
....
So you are saying the Netjets contract caused the financial markets to tumble???
Nope not at all. What I'm comparing this to is the "industry leading contracts" that happened with the legacy carriers that were wonderful when the times were good and burdens into (and nearly into) bankruptcy only a few short years later when the unions didn't react.

History is about to repeat itself, NJ has been flying high thus the "industry leading contract". But when revenues fall, and the contract doesn't adjust to the falling revenue more people are going to get hurt because NJ won't be able to adjust to the market pressure.

When that happens, it's not just the pilots that get hurt. It's the owners, the support personnel, the vendors and everybody else.

It's going to get ugly, and when it does we'll watch all the union supporters tell Santulli to "stuff it" when he asks NJASAP for give backs to match the reduced revenue to keep the company in good standing. The union doesn't know fairness, it only knows greed and selfishness.
 

B19 Flyer

....
Joined
May 8, 2006
Posts
1,595
Total Time
....
More insightful infromation from the # 1 graduate from the Orsnstein school of killing aviation careers. You may be right about RTS having heartburn, but the man knows numbers a helluva lot better than you and your cronies. I will go to war with RTS anytime, especially after the way I have been treated here my first year. God bless all those you have put out of work..Karma is a bit%h!;)
I know a little bit about entities and the of killing aviation careers as unions are without doubt the number one culprit.

Unions though don't stop at careers, they pit brother against brother and family against family. They will cannibalize until there is nothing left to take. Yeah, been there, done that with union carriers. Funny, that doesn't happen with my only venture into a non-union carrier.
Let's watch the upcoming months and see who screams the loudest. My guess is the non-union fracs will be the quietest because they have the most job security and the union shops will scream the loudest.

If you are having a "problem" with RTS, blame your union counterparts because they are supposed to have fixed "everything". ;)
 

CALRepublic

Well-known member
Joined
Jan 11, 2008
Posts
576
Total Time
plenty
B19 flyer, I see what you're saying. The thing is, we have to make enough to be respected as profesionals. If things went back to where they were (pre contract 2005), then we loose respect and credibilty as professionals and pilots. Back in 2005, I would airlne to a place, catch a ride on a CLS car someplace else. Get to talking with the limo driver, 4 out 5 times, his salary was twice my salary (as an F/O)........my college debt is 60,000, he paid nothing to become a driver.....do you see my point????
 

av8trinabarrel

Well-known member
Joined
Oct 22, 2006
Posts
258
Total Time
uhhhh!
I know a little bit about entities and the of killing aviation careers as unions are without doubt the number one culprit.

Unions though don't stop at careers, they pit brother against brother and family against family. They will cannibalize until there is nothing left to take. Yeah, been there, done that with union carriers. Funny, that doesn't happen with my only venture into a non-union carrier.
Let's watch the upcoming months and see who screams the loudest. My guess is the non-union fracs will be the quietest because they have the most job security and the union shops will scream the loudest.

If you are having a "problem" with RTS, blame your union counterparts because they are supposed to have fixed "everything". ;)
I have the utmost respect for RTS and the way he has treated me and my family. I wouldn't want anyone else at the helm. Nuff said!
 

RP170

Well-known member
Joined
May 12, 2005
Posts
1,030
Total Time
4000
Unbelievable! Does B19 ever give up on here?
 

Freedom

Well-known member
Joined
Mar 4, 2006
Posts
204
Total Time
5000+
Would you give up as a Pilot?

Unbelievable! Does B19 ever give up on here?
Of course not. It is how you make your living.

Bob19 is a Hired Hit Man. Scheeringa hired him. Ricci kept him.

His profession is that of a Union Buster. He is marginal as an Aviation Manager, at best. But he is kept around due to his Union Busting practice.

Once everyone realizes why he is here and what he is about, he and his words become powerless.

And you can count on those of us that know the man behind the mask, to continue ripping his mask off his face, no matter how many times he tries to put it back on.

Just ask yourself this: Bob19 has stated he works for a Part 121 Non-Union Airline. If that were really the case, why does he spend the VAST majority of his time practicing his Union Busting trade in the Fractionals forum?

Answer: He is a Vice President at Flight Options, and the day the Options Pilots are successful in securing a Contract, Bob19 is out of a Job.


Freedom is Not Free
 

Hogprint

If you aint Cav...
Joined
Apr 16, 2002
Posts
695
Total Time
6000
I know a little bit about entities and the of killing aviation careers as unions are without doubt the number one culprit.

Unions though don't stop at careers, they pit brother against brother and family against family. They will cannibalize until there is nothing left to take. Yeah, been there, done that with union carriers. Funny, that doesn't happen with my only venture into a non-union carrier.
Let's watch the upcoming months and see who screams the loudest. My guess is the non-union fracs will be the quietest because they have the most job
security and the union shops will scream the loudest.


If you are having a "problem" with RTS, blame your union counterparts because they are supposed to have fixed "everything". ;)
I'll bet you a case of your beer of choice it doesn't happen like you say. What's being printed in the funny papers is a tad different than what the latest news is out of CMH. ;)
 

JungleJett

Well-known member
Joined
Feb 16, 2004
Posts
1,111
Total Time
1
B19..

How about posting some info about your background in aviation. May lend a little umph to your post.

Who do you work for? In what capacity? Are you now or have you ever been a pilot?
 

CALRepublic

Well-known member
Joined
Jan 11, 2008
Posts
576
Total Time
plenty
B19 flyer, I'll add one more thing to my earlier post. Back in early 2005 (pre-contract), a couple of our owners asked me how much I was making, and I told them the thrut. One of them said and I quote " that's disgusting low" the other guy said " that's BS".........the fact of the matter is that you have to pay people to care, if you reward them, they'll do a better job, nothing in life is free, my certificates weren't..........I WILL NOT BRAKE MY BACK FOR 32,000 dlrs.
 

glasspilot

Well-known member
Joined
May 17, 2004
Posts
1,622
Total Time
9K'ish
Top