B/CA Show News - NBAA 2007 Day 2 - (Page 42)

N B A A 2 0 07 ON THE RECORD— Richard Santulli, Chairman and CEO, NetJets NetJets Makes Money, Buys Planes “All the benefits of full aircraft ownership—and more—with none of the responsibilities… the safest and most secure private aviation solutions in the world.” That’s a tall order, and it’s the basic NetJets premise and promise, the fractional ownership leader’s pledge to the world. Is it working? Evidently, yes. “Business is great,” says NetJets chairman and CEO (and founder) Richard Santulli. “It’s been very strong.” Subprime mortgage and hedge fund woes? No effect as yet. NetJets Europe? It’s turned the profitability corner. NetJets is expanding its already huge fleet, has kicked off a new environmental initiative actively endorsed by California Gov. Arnold Schwarzenegger, is—generally speaking— making itself more competitive, and is looking to branch to Asia. “There’s been a tremendous amount of wealth created, and wealthy people buy airplanes,” Santulli says. “It’s not Internet wealth. The Internet wealth went away as fast as it came. This is real wealth,” he says, pointing particularly to the emerging economies of Europe and the Far East. The combination of the dot.com bust and completion delays scotched plans for a NetJets BBJ fleet (“I wish we had 30 of them,” Santulli says, instead of today’s three), and aside from a happy-ending battle with the Teamsters, NetJets has had a wonderful 21stcentury run. Warren Buffett, of parent Berkshire Hathaway, gushes about NetJets and its executives in his annual letter to shareholders, and the firm has a staggering 494 aircraft on order for its U.S. and NetJets Europe fleets, worth about $9.4 billion at B&CA prices. “We keep making our fleet newer and newer,” Santulli says, pegging net gains of 50 to 60 airplanes per year over the next five years. As of this month, there are 704 aircraft in NetJets service, ranging from the Citation Bravo (18) to the BBJ, and including 41 Gulfstream IV-SP jets, 51 Falcon 2000 and 2000EX jets, 71 Citation X jets, 89 Hawker 800XPs, and 128 Citation Excel and XLS jets. NetJets has 26 more XLS and 55 XLS+ jets on order, as well as two new types: the Hawker 4000, for 81 units worth a B&CA $1.62 billion, and the Falcon 7X, for two dozen, worth a B&CA $974 million. NetJets Europe is to retrofit its Falcon 2000EX EASy fleet with “The big airplane market is ridiculously strong,” Santulli says. But because of the high trade-in value when he negotiates for replacement jets, like Cessna’s Citation X (16 on order), “We haven’t sold any nor will we.” NetJets earlier this month advised customers, both fractional owners and Marquis Card holders, that it’s waiving ferry costs for all flights to and from Mexico, Canada, the Caribbean and Alaska. “Depending upon the aircraft you purchase,” the company said, “this waiver may also include Central America, Hawaii and even Europe.” NetJets also has a year-old pact with pilots it’s seeking to simplify in cooperation with the union, and bring to a vote this fall. A new fiveyear labor agreement between NetJets and its maintenance workers was signed on January 16. Santulli says he’s skeptical, but the union claims credit for higher productivity. “In 2007, operating margins increased reflecting higher aircraft utilization rates as revenue flight hours increased approximately 15%,” according to Berkshire Hathaway’s second quarter earnings statement. NetJets fractional sales and flight operations revenues for the first six months of 2007 increased by $474 million over 2006. NetJets’ pre-tax earnings for the first six months of 2007 were $109 million in 2007 compared to $29 million in 2006, a 276% gain. “Contributing to the improved results of NetJets were the effects of price increases and a change in the mix of aircraft flown,” Berkshire Hathaway said. NetJets this month announced a new Comprehensive Climate Initiative, making carbon offsets available to customers while reducing the carbon footprint of NetJets operations worldwide. But the offsets, while making news because of customers like California Governor Arnold Schwarzenegger, Santulli’s most famous carbon conscious continued on page 44 This year will be our best year ever, by a lot. —NetJets chairman and CEO (and founder) Richard Santulli NetJets Names Executives NetJets has named ment and charter busiBenjamin Murray as ness as well as president and CEO of anyone, bringing a Executive Jet Managestrong sales backment. Murray sucground and prior exceeds Albert Pod, who perience at EJM to his served at the helm new role,” said Netof EJM as president Jets chairman and since 2000. Murray CEO Richard Santulli. returns to EJM after Gary Hart was named “I have full confiserving as vice presi- svp flight operations dence that Ben is late last month. dent of new business the right individual development for NetJets for the to lead EJM going forward.” past two years. Before that he was E a r l i e r t h i s y e a r, J i m vice president of sales for EJM. Christiansen was appointed as “Ben knows the aircraft managepresident of NetJets Aviation. blended winglets at a total cost of $4.4 million. High-mach winglets from Seattle’s Aviation Partners take the aircraft to the new Falcon 2000LX standard. NetJets gets discounts, sure, which Santulli declines to quantify. The hard numbers are difficult to put in perspective anyway, he explains, because the order totals include deliveries that are years away, and many of his dealings are predicated on the return of used aircraft, like Citation X jets, to the manufacturer as new ones are fielded. NetJets typically logs about 1,100 hours per jet per year. Some do more. “If it does less than that, it’s very inefficient use of the airplane,” Santulli says. That makes used NetJets aircraft well used indeed, but an aggressive service program ensures that they keep their value. People worried that NetJets’ volumes would hurt the used aircraft market, Santulli says, which was wrong, he insists, because “I’m more concerned about that than anyone else.” Used NetJets jets, he says, “have become a type that people would love to have.” 42 September 26, 2007 www.aviationweek.com/shownews

Table of Contents Feed for the Digital Edition of B/CA Show News - NBAA 2007 Day 2

Contents Spectrum Stresses Freedom Adam Shows A700 Cabin User Fee War of Words Execujet Boosts Services Saab's Got Your Back CAE Covers the Field London Airports Roundup Pratt & Whitney Canada Another Show! A More Digital Jeppesen CMC Rides Bizjet Wave Thales Weighs In We Fly the Eclipse 500

B/CA Show News - NBAA 2007 Day 2

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