Back in 2001, NetJets Europe might have considered a shortage of suitably qualified pilots to be a nice problem to face. At the time, the industry’s fractional ownership leader had no more than 80 clients in Europe–five years after having imported the concept from the U.S. But in 2006, the European operation achieved its first-ever net profit and now it is stepping up efforts to recruit some 180 pilots this year as it adds 24 aircraft to its fleet, including some of the 24 Dassault Falcon 7X trijets it ordered last September.
The aircraft due to arrive this year will bring the NetJets Europe fleet to almost 140, and more are due for delivery in 2008. The company admits that finding and retaining flight crew for this burgeoning operation has proved somewhat challenging–especially since it prides itself on employing pilots who are among the most experienced in the business. Last year, NetJets Europe acknowledged a flight crew turnover rate of 8 percent, with many pilots being lured to positions with Europe’s fast-growing low-cost airlines which have been offering attractive pay packages and more predictable working patterns.
NetJets’ management has tackled this challenge in two ways. In December, it offered flight crews new contracts and improved pay and terms of employment (see box). Then in February, it launched an ab initio pilot training program that it expects will deliver 45 new first officers each year.
The part-sponsored program will be run by the UK’s Oxford Aviation Training (OAT), with the first 17-month courses due to start this month. Trainees will complete OAT’s standard ab initio ATPL course, which will be supplemented by about two weeks’ additional instruction mandated by NetJets to cover unusual attitude training and VFR operations at certain demanding airports. After the course, the new ATPL holders will undertake a further six months’ training with the company before being rostered as line pilots.
According to the OAT Web site (www.oxfordaviation.net/netjets.com), the total cost of the ab initio ATPL will be approximately £75,000 ($145,000). This includes the cost of training, tests and accommodation.
In the first year of employment, NetJets will pay its trainee first officers €36,500 ($47,000) plus a one-time payment of €20,000 ($25,800) toward repaying their training loans. The company expects it will take the pilots five or six years to repay the rest of the loan, with deductions taken from their monthly salaries. Afterward, the new pilots will be paid the full NetJets Europe first officer starting salary of €56,500 ($75,145), adjusted upward to take into account the seniority they will have accrued by then.
NetJets Europe’s existing minimum requirements for new first officers with ATPLs is 1,500 hours total flying time, with multi-engine and multi-crew cockpit ratings. After six months as a first officer, pilots with at least 3,000 total hours can apply for promotion to captain, for which they will receive upgrade and line training.
The company selected the first NetJets Europe ab initio candidates last month. Further courses are expected to start in June and August, with more candidates subsequently to be chosen for next year’s courses. NetJets Europe has said it is eager to be able to directly shape the training of its pilots and to attract candidates who are committed to forging a long-term career with the company.
Buffett Hails European Turnaround
NetJets Europe’s long-awaited first profits were revealed by U.S. billionaire Warren Buffett in his annual letter to shareholders of his Berkshire Hathaway investment group, which owns the fractional ownership group. Buffett’s letter, published on February 28, reported that NetJets Europe’s fortunes have been turned around largely because of a dramatic rise in sales, with 589 new customers having joined the program in 2005 and 2006. The company now has more than 1,300 customers in Europe, and claims that they include a quarter of the continent’s 50 largest public companies.
The Berkshire Hathaway chairman acknowledged that this is a far cry from its first five years in business when it attracted a total of just 80 clients. By mid-2006, cumulative pre-tax losses from NetJets Europe had reached $212 million.
Last year NetJets Europe made more than 62,000 flights–33 percent more than in 2005. According to the company, its biggest markets are the UK, France and Switzerland. It has also reported rapid growth in Germany (46 percent more customers in 2006 than in 2005), as well as in central and eastern Europe (up 54 percent) and in Russia (up 40 percent).
NetJets Europe CEO and chairman Mark Booth said the results have vindicated the company’s strategy of investing for the long term. “We are thrilled that NetJets Europe achieved net profitability in 2006, a year ahead of schedule,” he commented.
Buffett’s letter to shareholders said that NetJets Europe is expected to continue operating at a profit. He also reported that NetJets’ operation in the U.S. achieved pre-tax earnings of $143 million in 2006, despite having suffered a $19 million loss during the first quarter of last year.
Berkshire Hathaway owns the London-based sales and marketing division of NetJets Europe. It also holds a 49-percent stake in NetJets Transportes Aéreos, the Portugal-based company that holds the company’s commercial air operators certificate. Under European Union law, commercial operators have to be majority-owned by European Union citizens.
New Deal Heads Off Union Movement
The new deal offered by NetJets Europe to its flight crew in December was intended to resolve two key issues: first, the need for pay and conditions to keep pace with remuneration being offered by a booming airline industry; and, second, widespread concern about tax and benefits complications arising from the company’s use of offshore employment contracts that excluded employees from European Union employment rights.
Pilots and flight attendants were offered raises ranging from 4.7 percent to 26.7 percent, as well as new roster arrangements that will limit maximum duty days to 50 days per quarter.
The company also announced that it would end its practice of employing flight crewmembers under contracts in offshore jurisdictions such as the Isle of Man and the Cayman Islands. Significantly, the new contracts are permanent, rather than being renewable at three-year intervals.
NetJets Europe is also standardizing rosters for most flight crewmembers to a 6/5 pattern of six days on duty and five days off duty, with a maximum of 50 mandatory work days in any quarter. Previously, staff worked variable rosters of 6/5, 6/4 or 6/3, with a maximum of 18 days in any month.
Under the new arrangements, which took effect January 1, flight crew members are required to work nine fewer mandatory duty days each year. At the same time, they have the option of working up to an additional six days at supplementary rates ranging from €550 to €1,000 ($715 to $1,300). However, flight crews of both existing long-range Gulfstream V/550s and on-order Dassault Falcon 7Xs will work a combination of 7/6 and 6/5 rosters, albeit with the same maximum quarterly duty time.
Last year, some of the operator’s pilots started forming a trade union called the NetJets Europe Pilots Association. The plan was to establish the union under French law this past January.