TA pay vs. FA pay

[SenorSpielbergo]

I'm flattered, but I'm not "Richy." And I don't have a 737 type. Not yet. Nor do I have a house in PBI. Not yet. Anyway, ignorance is not something I'm blessed with, because friend, otherwise I'd be more like you.. VmaxFlyR, your post was articulate and conversational, so it'd be a pleasure to continue the dialogue with you. Snakepit can watch.

About the legal ramifications of shutting down Netjets; they'd hardly be a deterrent from folding the program. While messy, a bankruptcy would allow the company to reject most, if not all of its existing contracts. The owners are pretty clean. As secured creditors, in that they own the aircraft, the liquidation would be cleaner than what would happen at a airline-like company that owns or leases its aircraft. The owners would be stuck holding shared ownership contacts tied to their specific serial numbers, and someone would make a boatload of money remarketing these aircraft on their behalf. Core aircraft would be sold and used to pay off other creditors.

Warren Buffet's job is to maximize the return of the BH portfolio to its shareholders, and Netjets is a very, very small piece of that portfolio. To sell off (or liquidate) an underperforming asset is just another business decision people like him get paid to do. Admittedly, the fact of the matter is that many of BH shareholders are Netjets owners, and that emotional connection might temper what might otherwise be a very, very easy decision to exorcize the company from the BH family. Those kind of emotional decisions do find their way into strategic planning every now and then, as evidenced by many corporate travel needs that would be more economically met by fractional or charter than by existing in-house flight departments.

There has also been some discussion on this board about the growth of Netjets assets over the last few years, and that this is somehow evidence of Netjets financial strength. Growth in aircraft assets has virtually NO effect on the company's ability to continue as an ongoing concern. The company does not own them, and cannot leverage them to obtain operating capital. The lifeblood of this type of business is the cash generated from operations, not assets under management. Your point, maximizing profits by minimizing costs, is correct, and is always going to be the way an aircraft operating company succeeds. Southwest, JetBlue, and AirTran all do this. Southwest is facing "cost-creep", and its day of reckoning is coming. Bigger is not always better, especially in the aviation business.

About Comair/Delta. You mentioned that "NetJets Inc is no Delta, as Comair had the threat that other DL outlets/suppliers (ASA along with other regionals that are "wings-for-hire"). There is no one else to do NJA flying, at least at this time." That's true, but from the BH perspective...who cares? Why does BH care whether Netjets' former customers can find someone else to carry them around? Delta needed Comair's feed, and had the benefit of ASA and others to take up the Comair slack. Berkshire Hathaway has no "need" for Netjets' lift. It needs return on invested capital, profits, cash generated from operations.

The only, only thing that Netjets might have going for it is that Warren Buffet is known to have amazing patience in his investments. But faced with the grief of a nasty labor issue with the pilots, how long do you think he'd be willing to wait?

So, therefore, all of this is a reasonable excuse to keep corn-holing pilots. Great.

 

[VmaxFlyR]

Number$Cruncher:

You present some well thought-out, but not necessarily accurate, IMHO, perspectives.

Should BH decide to divest itself of NJA, although at this time I don't see it happening, NJA would not necessarily just "disappear." Assuming the basic "fractional model" originally designed by Santulli is not inherently and fatally flawed (as I, and WB, and you (?) all apparently agree), if any provider is best positioned to dominate (read: expand, prosper & eventually profit), it should be NJA, and a lot of smart & well connected (socially, financially, and, politically?) folks know that. This concept has now even made it's way into smaller, piston aircraft, and we've had time share properties for how long?

NJA produces huge, valuable cashflow, as well as a captive customer for BH's other division, FlightSafety, covering fixed expenses over there, even at "negociated, discounted" fee structures. In holdings as vast as BH, it all can add up...

And the the fracas from the actions of those owners, along with their 1-15 partners, whom have been handed the keys to a jet that has far more hours on it than "they've" utilized (remember, an owner may never fly in their own jet, but they're flying in someone's, that poor devil, as they fly off their contract hours) in a suddenly over supplied and soft market will be an attorney's bonanza in itself. BTW, when is it ever too late to take the bar?

Should BH "tire" of NJA, there would exist an opportunity that it could go the way it may have already gone had WB not jumped in, to become a public company. Now that may be contrary to Santulli's overall goals of control and self-determination, but I've learned to "never say never..." Circumstances, value and market opportunities could end up being a powerful aphrodisiac for Santulli and WB. NJA is still Santulli's "baby," and BH holds portions of many, many other public companies. Could the settlement of this contract (as the T/A is written) be a new prom dress in NJA's ultimate future?

Could there be a need for a realignment of costs, or a "tweaking" of the fractional model? Possibly, but from what I've read about ineffiencies and out-right waste at NJA, this contract is not the wisest place to start, or to view as the answer to NJA's ultimate "profitablity," which as I stated earlier, I do not believe is the current tactic. Despite what Santilli's, NJA's upper leadship, and even WB's feelings may be about their pilots, they are "stuck" with them because as you've said, NJA is not an airline-type company. Nor are they really an aircraft operating comapny, as you've indicated in your cost comparison to SWA/JB. Both those companies do own their aircraft.

NJA is a service company (and admittedly a sales company, however that "division" is totally dependant on "service..."), even more so than SWA and JB may see themselves, for the above asset management rather than ownership reason, not that I'd believe profit is not generated through the hourly occupied fees. NJA pilots are the rank-and-file, day-to-day, frontline providers. Why Santilli/management/HB, or any wise manager with a supposed eye on the long term, would not want to guarantee the aircraft owner's expected level of satisfaction (read: repeat customers, referrals, future sales, etc.) has me puzzled...How much long term damage has been done in this tactic? The fact that the owners have not become involved yet sounds like it may change with a "new MEC."

NJA will have to become very creative in thier marketing message & strategy if they plan to sell themselves as the most solid, most experienced, most safe provider, if they put in place an environment that does not encourage those same values in their pilots, one of their main "service providers."

My understanding is that there will be a sizable portion of the existing work force that will not choose NJA as a career, while NJA will attract less experienced, less committed "time-builders" or "type-seekers" as already indicate on this board. This just doesn't bode well for a supposed "high-level, service company," nor for bottom line training and turnover costs, if this is supposed what management is hoping to contain.

And face it, were not talking about an eventual "Wal-martification" of this fractional industry as has occurred in the airline seat/commodity industry, because the financial commitment by the owners is waayyyy out of reach of anybody other than this country's established and privileged elite--indeed, the whole fractional, particularly NJA's, image is designed to be anti-mass, "Anti-WalMart."

My understanding is that once NJA "sells out" an aircarft, it no long is an assset to NJA--the profits of the sale contibute to the bottom line (somewhere.) I agree that core aircraft are a part of NJA's asset base, but that alone does not count for the growth of the net value of NJA, unless some rather deceptive accounting has been applied, which I stongly doubt.

BH does, or should care, about the ""need" for Netjets' lift," because that is what NJA and the fractional model is all about, unless BH or NJA just wants to be an aircraft broker.

The

"return on invested capital, profits, cash generated from operations" is there and again, were I Santulli/BH I may have considered the same tactic, but in the end it could undermine those same long term strategies they ultimately pursue. There seems to be a disconnect in BH/NJA long term goals and the current tactics, whether they are successful in getting this T/A passed or not, unless I'm missing something.

This will be an interesting, drawn out, but hopefully not sad, eventual process for all involved...stay tuned.

 

[Number$Cruncher]

Excellent! An intelligent debate!

This will be an interesting, drawn out, but hopefully not sad, eventual process for all involved...stay tuned.

I couldn't agree more. Your thoughts are worthy of careful consideration, so I'm going to wait until I have a few minutes later tonight to reply.

 

[kingtut]

Wonderful discussion, don't mean nothing. WB is in the winter of his life (Sadly, his wife of many years just past.) so what will his successor do? Will he be as willing to wait as WB? We'll see!! Mean time, I suggest we not price ourselves out of the competition.

Who will fly the rich and famous around you ask? CS. FO, FLEX.

Bye for now and bye bonds.

 

[netjetwife]

Research results---thanks to JM--another NJwife.

Gentlemen, why not let Mr.Buffet speak for himself on the question of whether or not he is prepared to wait for the returns on BH's investment in NJA? Quoting from the 2003 Berkshire Hathaway Annual Meeting:[font=Verdana, Arial, Helvetica, sans-serif]"There are three major competitors. We have always been the biggest and our market share is rising. At 75% recently. I believe all of our competitors are losing money on an operating basis -- not even including asset write-downs. I think some of them will exit the industry -- look at Raytheon's recent prospectus. There will be a shake out, and we will not be one of the ones shook. [/font]

[font=Verdana, Arial, Helvetica, sans-serif]This will eventually be a huge business for us -- 10 times what it is currently."[/font]

www.tilsonfunds.com/brkmtg03notes.html

Those are not the comments of an inpatient man--sounds more like bragging!
For those that scoffed at me for claiming that NJA has 75% of the market, note that I had a very good source. The money for professional pilot salaries-NBAA standard-- IS THERE! It's just been poured back into the business, growing the company at the expense of the pilots and their families. Enough already! It is time to invest in the pilots. The TA will not pass.
NJWife/LB

 

[Grim Reaper]

In fact, the fractional model is changing. The Card programs are all the buzz. NJA started it and all the others are following.

Customers like it, especially with the changing tax laws that will proscribe the owner for deducting pleasure travel in a private aircraft. No more tax breaks for pleasure travel to KASE. No need to buy a share of an aircraft and wonder about residual values with a large number of used acft on the market and the ability to spread the card purchase over a variety of acft allows more flexability for a somewhat fixed price.

With the advent of the card programs, the fractional providers are moving to Pre-Paid On Demand Charter and that's fine. To continue to compete, the companies must responed to a changing economic paradigm by changing their paradigm.

 

[NJAowner]

Changing model

Grim -- the model is not changing but expanding. The cards make sense for those who either do not want a multi-year commitment or who plan to fly less than 50 hours per year (there may also be other reasons). If you plan to fly at least 50 hours per year and anticipate the need for several years, the cards are very expensive when compared to actual fractional ownership.

With regard to WB's successor, keep in mind that while he has not announced one, he has dropped many hints in public over the past few years about RS and his abilities to BH beyond just NetJets. The consensus of Wall Street analysts who follow BH have RS and the leading successor.

Fly safe.

 

[FL450]

How do you feel about Marquis renting your aircraft?

As for RTS, if the Company is in such dire straights as they claimed in negotiations, wouldn't he bear the responsiblity for us being in that situation?

 

[Grim Reaper]

The Model Expanding / Changing. Ok, I'll go with that. Yes the cards are expensive, but, as you correctly state, there is great appeal to those who require less than 50 to 100 hours per year of acft services.

Question, how many owners need / use a fractional acft 50 hours or fewer per year? I do not know, but I suspect the number is sizeable.

 

[Grim Reaper]

Yes, I have heard that RTS is a possible to replace WB. I have also heard some other names thrown around.

As with everything in life, it is a situational issue. The NJA pilot labor contract situation will have an impact on RTS / NJA no matter which way the TA vote goes.

My dear old dead Grand Mother told me once, "Never let your first impression of someone be your last impression of that someone."

 

[netjetwife]

Is it true that the F/Os still make less than the flight attendants? How about after their contract gets signed?
And the G-lV FAs are making more than the BBJ FAs.

I hate to say it but, what have the Teamsters done for us?

I asked a friend ( a flight attendant--not at NJA) about your question. Her response was that they do not in the beginning make more, but at the 6 yr point the Domestic FAs that work for the major airlines all make around the same or more than a 2yr FO at NJA---$27K-$32.5K The pay was based on 75 hours and does NOT include per diem.


Rather than asking "what have the Teamsters done for us?", instead we should look at what we've done for ourselves. A union is only as strong as its members, and, more critically, its leaders. Only when the members stand up and fight for themselves, and produce an MEC that has true leadership abilities, will they get a contract that is a true reflection of their contribution to the company's success. At 75% of the market share, the success of NJA is not in question. Their respect and treatment of the very pilots that have helped to build the business, clearly is!


Note: I am NOT claiming to be a member myself, but the wives are behind their husbands/members 100% in a fight that affects them directly and personally.

 

[AA717driver]

Note: I am NOT claiming to be a member myself, but the wives are behind their husbands/members 100% in a fight that affects them directly and personally.

That is what so few pilots understand. My wife has been more adversely impacted by the lousy contracts, job changes and layoffs than I have. You are right and entitled to step up and make your opinions on these issues known, NJW. Good luck, but remember, there is life after the TA.TC

 

[CRAWDADDY]

I asked a friend ( a flight attendant--not at NJA) about your question. Her response was that they do not in the beginning make more, but at the 6 yr point the Domestic FAs that work for the major airlines all make around the same or more than a 2yr FO at NJA---$27K-$32.5K The pay was based on 75 hours and does NOT include per diem.

I don't think you need to go outside of NJA to make the comparison. I believe up to the 3rd year, F/As make more than F/Os (current contract or lack thereof)

But then F/As (ISRs) never came cheap nor paid for their training etc. It's much better not loving to fly or needing to to stay current.


Columbus Approach, CATFISH 824 is 'on board' at FL410