"...the frac model simply doesn't work "

[gunfyter]

...
The union did not cause management to shut down the Cessna frac business. People who believe this, pro or anti union, do not have a clue. Sorry to say it, but the company probably did the right thing because the frac model simply doesn't work except in a period of high new owner sales. The actual operation of the a/c loses money and profits have to come from share sales or other sources.
....

I am curious to see what BRK reports as Netjets results for 2011. Except for the Financial Crisis ... NJ has had several $200M plus profitable years according to the annual Reports.

IMO, Fracs will work. I think the smaller, slower and shorter range ships are money losers... but needed for the overall system. The right mix of jets and support for it ... might be the trick.

 

[BentOver]

I am curious to see what BRK reports as Netjets results for 2011. Except for the Financial Crisis ... NJ has had several $200M plus profitable years according to the annual Reports.

IMO, Fracs will work. I think the smaller, slower and shorter range ships are money losers... but needed for the overall system. The right mix of jets and support for it ... might be the trick.

If it didn't work there wouldn't have been nearly 1000 frac. jets in use back in 2007...... Netjets does 2300-2600 passenger flights a week (still). Some days, like this Friday and Monday, well over 500 each day...

The model still works, maybe not as well for smaller places, but I don't really think NJA is hurting as bad as M.L. says it is......

If it really didn't work for NJA, they wouldn't still have 2500+ pilots on the payroll. With absolutely zero sign of that number decreasing. (contrary to M.L. syas IMO)

I never understood those that say the model doesn't work. Fracional flying is nearly the same as charter in the way that users use the a/c, except for the cash outlay. In the end the buyer has ownership in a tangible asset. Sure, in some cases, like the worst recession since the 1930's, that asset loses big. But for the most part an owner gets the write-offs. Use of a plane and can sell said asset GUARANTEED in 5 years.
(or even 2.5 years)

NJA may be more expensive, but so are alot of things. I'm not rich but I choose to shop at Target or better vs. Walmart. Why, because I can afford NOT to shop at Walmart. Wealthy people buy $80K cars that get them to the same places in the same time as my $40K Dodge 1500. They buy those things because they can. If I could afford a nicer car I'd go with a nice 6 series BMW or Mercedes also. It's just the way it is. People who can afford to fly private, but don't want their own whole jet, will most often choose the nicest thing their money can buy within reason. Fractionals, Netjets specifically, is a very luxurious and prestigeous way to travel vs. Joe Shmoe's Charter. And some people want to have that prestige around them.

Owner retention was very high in 2011. Sales didn't cover the losses, but it doesn't sound all that devastating going into 2012.


I am expecting to hear some form of recall news around 24+/- months from now. I'm still holding the faith that the things are not as bad as they are painted to be.

EDIT: Sorry, I should have started out by saying I agree with you. Just in case the msg. didn't come through like I wanted.

 

[Helmsalee]

Just checked Flight Aware. 106 NJ jets in the air. I love it when you have to go to 3 pages.
Helm

 

[Helmsalee]

And that does not count the planes flying international using the N number callsigns.

 

[brokeflyer]

netjets is more expensive because their pilots are better.

 

[gret]

Just checked Flight Aware. 106 NJ jets in the air. I love it when you have to go to 3 pages.
Helm

What percent of the fleet does that represent? Should be a lot of activity on the Thursday before one of the busiest weekends of the year.

AIN Alerts had this little piece today-

Bizav Flying Recedes for Second Consecutive Month

Business aircraft flying activity in the U.S. slid 0.9 percent in January versus the year-ago period, according to TraqPak data from aviation services company Argus. This marks the second consecutive month of erosion on a year-over-year basis. While Part 91 flying climbed by 4.5 percent over January 2011, it wasn’t enough to offset losses of 6.3 percent and 8.3 percent, respectively, at the fractional and charter providers. Flying activity at Part 135 charter operators has now declined for 12 consecutive months.​

 

[Webslinger]

What percent of the fleet does that represent? Should be a lot of activity on the Thursday before one of the busiest weekends of the year.

AIN Alerts had this little piece today-

Bizav Flying Recedes for Second Consecutive Month

Business aircraft flying activity in the U.S. slid 0.9 percent in January versus the year-ago period, according to TraqPak data from aviation services company Argus. This marks the second consecutive month of erosion on a year-over-year basis. While Part 91 flying climbed by 4.5 percent over January 2011, it wasn’t enough to offset losses of 6.3 percent and 8.3 percent, respectively, at the fractional and charter providers. Flying activity at Part 135 charter operators has now declined for 12 consecutive months.
​

Guys...Im all about being positive..lets face it though. Under Obama and the current condition of our economy there will be more layoffs this year from many of the fractionals...if you really think that NJA is "bringing guys back" you living in a fantasy world...wake up, stay positive but for crying out loud see things the way they are!

 

[Helmsalee]

"What percent of the fleet does that represent?"

Well, according to the union info, there are less than 400 active airframes. That would mean over a quarter of the fleet airborne.

 

[Club ORD FO]

I think it depends on how you define the fractional model. Company A makes their money selling the plane and then operates them for a wash or a loss. Company B deeply discount the sale and thus makes almost no money on the aircraft sale but operates that aircraft for a gain on each live leg. Company C makes a little on the sale, and a little on each live leg.

Company C for the win

 

[BentOver]

What percent of the fleet does that represent? Should be a lot of activity on the Thursday before one of the busiest weekends of the year.

AIN Alerts had this little piece today-

Bizav Flying Recedes for Second Consecutive Month

Business aircraft flying activity in the U.S. slid 0.9 percent in January versus the year-ago period, according to TraqPak data from aviation services company Argus. This marks the second consecutive month of erosion on a year-over-year basis. While Part 91 flying climbed by 4.5 percent over January 2011, it wasn’t enough to offset losses of 6.3 percent and 8.3 percent, respectively, at the fractional and charter providers. Flying activity at Part 135 charter operators has now declined for 12 consecutive months.
​

Management openly said that January traffic was weak compared to last year..... But this week NJA is right back up to 2400 and something flights....

The weekly update stated Friday and Monday were going to be 500+ flights (I believe, been a week since I read it)...... 100+ airplanes airborne is alot compared to the usual 60-80 airborne at any given hour...I'd expect tomorrow to be busy all day and Monday also.....

And to the guy blaming Obama... Go back to Fox news....Open your eyes to the reality that although it is a slow process things are improving... Where I live there are commercial construction projects starting all over the place. The amount of foreclosures in my neighborhood is way way down. And last I checked the stock market, which is a leading indicator, is showing a lot of underlying strength this year. (even with the bad Euro zone reports and Greek default talk) The fear is pulling back and will be giving way to increased spending and confidence...

How that translates to people willing to spend millions flying??? Hope it's positive and right quick.

If layoffs come it will because of the competition, or a change in business plans. Not the fault of the business model (frac. flying)

 

[ozpilot]

netjets is more expensive because their pilots are better.

Well I guess that explains why the G-wizs are more expensive that a Citation X!

 

[rettofly]

netjets is more expensive because their pilots are better.

Nah. It's because of the union contract.

 

[CALRepublic]

Going by that "DO NOT DISTRIBUTE" letter we got from management, NJA's financial results for 2011 should be slightly better than 2010 (unless I read it wrong). Supposely we made $204 mil in 2010. If you Netjets guys still have that email, you should be able to come up with a final figure for '11....

I believe we lost money 2Q 2011 and that was due to the Gulfstream cancellation fee, supposely that was a pretty good hit

 

[Hogprint]

Nah. It's because of the union contract.

So...

How do you reconcile the math between '97-05?

 

[BentOver]

Going by that "DO NOT DISTRIBUTE" letter we got from management, NJA's financial results for 2011 should be slightly better than 2010 (unless I read it wrong). Supposely we made $204 mil in 2010. If you Netjets guys still have that email, you should be able to come up with a final figure for '11....

I believe we lost money 2Q 2011 and that was due to the Gulfstream cancellation fee, supposely that was a pretty good hit

Furloughed so don't get the updates, but that was my take also. The cancellations hurt 2nd quarter (to the tune of nearly 50 million??), but other than that it was relatively good. (depending on how the books are cooked)

But a profit is a profit on the eyes of shareholders! If it says profit, they will be happy, no matter how the numbers are derived.

 

[mtnrunner]

It's fair to say that there are various financial models tracking NetJets. This is for a number of reasons, the two most significant are the used aircraft market and OEM's.

Why?

Brokerage and Search Firms:
NetJets has a significant impact on used private jet prices. One of the reasons the used market is so depressed is the common knowledge NetJets has a significant used inventory where over one hundred have hit the market, another hundred are positioned to hit the market, and another hundred are being positioned to hit the market over the next two years. Ironically, by and large these aircraft are being refurbished to compete because that all these high time high cycle airframes being sold at crazy low prices are good for.

OEM's (All part of Fortune parent companies)
The OEM's know NetJets dumping large blocks of old aircraft on the market hurt the specific OEM's new aircraft backlog and used aircraft prices.

NetJets is under an industry-wide private aviation microscope and nobody believes NetJets is cash positive. Accountants can be as creative as they want and profits often reflect the finance departments creativity. But cash, positive cash-flow, and owners equity are the name of the game.

But from a pilot or labor perspective who cares? According to Berkshire and NetJets management NetJets is doing great! So every labor unit should expect to secure better job security, wages, and working conditions throughout the next cycle of bargaining.

If NetJets is truly posting net earnings of $200 plus million a year -- every unionized pilot, flight attendant, dispatcher, and mechanic should insist 10% - 20% increases in pay.

Not rocket science here but record profits don't produce labor concessions, record profits produce new standards in job security, wages, and working conditions.

NetJets is Warren's problem as a result of his own failures and nobody else's. Don't put it on your shoulders. Enjoy the ride as best you can! Worry more about steering the boat you're in, more so than redirecting the river you're riding... Its a much more productive energy.

Its been a fun ride - no doubt about it. Everyone should find a way to enjoy the ride to the end... :beer: ...tomorrow or decades from now!

 

[BentOver]

If NJA management was trying to leverage the pilots in any way they haven't exactly followed the old playbook...

--Posting profits

--Dispelling any furlough rumors

--generally claiming things are fine at NJA


All these (and some more) are not the usual, "we need a concessionary contract because we are going bankrupt" tactics....

I find myself slightly more positive about NJA's future

 

[gunfyter]

$200 Million is not much money ... for the amount of planes being operated... and the total number of employees....

How much would you pay for a business that you could expect to earn $200M per year, consistently? I would probably pay $1-2 billion. A 10% to 20% ROI. But I don't know much about investing in businesses otherwise I would be in the back rather than the front of the airplane.

I don't know how much BRK has invested in us.

 

[gunfyter]

Marquis Card.... Don't leave home without it?

Another way to look at it is as though BRK bought a Bank that issues credit cards. American Express charges some fee to the vendors who accept the AMEX card, I guess about 3%.

Look at NJA as a Merchant that has $5Billion in transactions mostly from people who have BRK A-shares. The $200M in profits that NJA makes on the $5Billion in transactions is 4%.

That's better than the 3% AMEX gets on their Card.

 

[gunfyter]

More like the playbook for a sale to another entity.

If NJA management was trying to leverage the pilots in any way they haven't exactly followed the old playbook...

--Posting profits

--Dispelling any furlough rumors

--generally claiming things are fine at NJA


All these (and some more) are not the usual, "we need a concessionary contract because we are going bankrupt" tactics....

I find myself slightly more positive about NJA's future

A sale price of $1-2 Billions (10-20% annual ROI) ... and a 4% profit of all cash flowing through NJA ....

Attractive Investment for sale?
​