A “much improved situation is emerging at NetJets,” according to Warren Buffett, chairman of parent company Berkshire Hathaway. In his annual letter to stockholders, published February 28, Buffett said NetJets has “never had a problem growing. But profits had been erratic.”
NetJets’ move into Europe, which began in 1996, was “particularly expensive.” After five years of operation there, “We had acquired only 80 customers. And by mid-year 2006, our cumulative pretax loss had risen to $212 million.” Buffett’s letter reported that the company’s fortunes have been turned around, largely thanks to a dramatic increase in sales; European demand “has now exploded,” with a net of 589 customers added in 2005 and 2006, bringing the number of European customers to more than 1,300.
The letter reported that last year NetJets Europe achieved an undisclosed net profit for the first time since the program’s launch, and a year ahead of schedule, according to NetJets Europe CEO and chairman Mark Booth. Buffett continued, “Under Mark Booth’s brilliant leadership, NetJets is now operating profitably in Europe, and we expect the positive trend to continue.”
The European operation currently employs around 670 flight crew and operates 114 aircraft. This year it intends to add another 24 aircraft, including the first
of 24 Dassault Falcon 7Xs ordered last year.
‘He’s Absolutely Tireless’
NetJets’ U.S. operation also had a good year, with the company generating earnings of $143 million compared with a loss of $80 million in 2005, primarily because of the need to charter to meet “unusually high owner demand.” Buffett said NetJets last year “added aircraft to the core fleet and developed strategies to address capacity issues and restore profitability.”
Buffett credits Richard Santulli, along with Booth, for this turnaround. “Rich, like many of our managers, has no financial need to work. But you’d never know it. He’s absolutely tireless–monitoring operations, making sales and traveling the globe to constantly widen the already enormous lead that NetJets enjoys over its competitors. Today, the value of the fleet we manage is far greater than that managed by our three largest competitors combined.”