NetJets may be ubiquitous with the concept of fractional ownership, and by far the dominant player in the market, but the big question remains, is the unit of Berkshire Hathaway worth a premium?
(Updated Feb. 12, 2020) Of the over 1,000 subscribers to Private Jet Card Comparisons since we launched nearly two years ago, I get to talk with perhaps 20%, so while it is more day-in-day-out contact with private aviation consumers than probably any other journalist, it’s still a relatively small sample of users.
Subscribers range from Fortune 100 companies to owners of all sorts of successful businesses, retirees who no longer have access to the company jet, professionals from medicine, law, and finance who might use jet cards for both personal and business travel and wealthy individuals, some of who are buying jet cards for family members such as enabling a daughter to regularly bring over the grandchildren.
Only 29% say jet cards are their only private aviation solution and 99% are current users of private aviation. In fact, 12% own full aircraft and five percent also own fractional shares. In other words, their feedback is very useful to me and provides great insights I can share with other subscribers. It’s also helpful when I try to do a deep dive into a company, as I will attempt here.
Who Buys Jet Cards?
Most jet card buyers are already users of
Not Ready For 5 More Years
Then I get fractional owners with NetJets. Usually, their share is winding down and they’ve decided to see what else is out there. In some instances their flying patterns are changing so they are not ready to make another five-year commitment or even three years.
The idea of having similar service points as fractional ownership (guaranteed availability, fixed hourly rates) but without the long-term commitment has sent them to look into jet cards, which to the surprise of many make up close to 20% of NetJets’ flying.
At any rate, for the most part, they don’t have any complaints, just the question, is the price worth it? Yes, NetJets pricing! Can I get something similar and save money? Private Jet Card Comparisons gives subscribers comparisons of over 50 providers if you want to do your homework before buying.
When I am talking to folks from finance or procurement departments of big companies, particularly those that are publicly traded, or advisors to UHNWS, NetJets is usually among their top choices. The old adage
As a unit of Warren Buffett’s Berkshire Hathaway, NetJets has the iconic investor’s seal of approval. He’s even appeared in ads for NetJets – with Bill Gates about 15 years ago. During the annual shareholder’s meeting in Omaha, which is literally a trade show of Berkshire companies, NetJets aircraft are often used as a backdrop for various cable television shows covering the event.
Financial Staying Power
The second point of reassurance for risk-averse buyers is the company’s staying power. In 2009, hit hard by the Great Recession, the Columbus, Ohio-based operator racked up a $711 million loss, something that would have probably been a death blow to many companies. With Berkshire’s backing life went on.
In private aviation, new state-of-the-art aircraft alone don’t guarantee staying power. Look up Zetta Jet, which left a 70-page long list of creditors, including those who had prepaid six figures for charter flights. Same with Avantair, a fractional share provider, which closed down and was later found to have falsified maintenance records of its fleet during its money squeeze.
NetJets executives say the pilot shortage will last through 2034 – that’s right 15 more years. During the Corporate Jet Investor conference in Miami last year an executive with Jet Edge, a management company that specializes in large-cabin jets, said the market rate for Global Express pilots had recently jumped to $300,000. Instead of interviewing pilots, pilots were interviewing management companies. “Does the owner have young kids?” “So do I. Forget it. I don’t want to be flying every school holiday.”
Flight crews at NetJets average 16 years with the company and over 10,000 hours. Its attrition rate is under 5%, including retirements and extended leaves. In 2018 it hired 185 new pilots who had an average of 6,500 flight hours. “We’re not a stepping stone. We’re a destination,” says Alan Bobo, an operations executive. Some do go to the major airlines, and less than 1/10th of 1% go to other business aviation companies. The message is NetJets gets the creme of the crop.
After several years of acrimony between the pilots and management post Recession, new management has brought a new day. Increased flexibility, including now 200 bases in the U.S. alone, plus opportunities to earn more by flying more have returned the esprit de corps, a critical part of the formula since in private aviation the pilots are the main conduit to the customer. Perusing several pilot websites, there doesn’t appear to be any remaining ill will and the consensus seems to be pilots are in a good mood about management and working conditions.
In addition to their twice per year five-day visits to Columbus which include four days of recurrent simulator training at Flight Safety, they also get service training. The head of owner experience hails from Ritz-Carlton.
Sometimes it means saying no when the flight crew believes a decision could impact safe operations. “Our owners pay us a lot of money to tell them no,” says Don Wittke, the chief pilot.
Calculating the Value of NetJets
Calculating value isn’t straightforward, but NetJets doesn’t make it easy either. To start, NetJets is the least transparent when it comes to the pricing of any provider we cover.
That is, they don’t publish pricing on their website, and in fact, you can’t just call up and get pricing. From what I’ve been told by subscribers, you basically get interviewed before you can get it.
The pricing I’ve seen is (and is included in our spreadsheets), for the most part, is second hand. (NetJets is the only company that doesn’t provide us pricing information directly although they do provide quite a bit of data that isn’t available to the general public). What’s more, pricing in a brochure versus what you actually pay is impacted by lots of variables, so without seeing all the particulars, it’s pretty hard to nail down exact numbers.
The hesitancy for NetJets in publishing a public rate card, for jet cards, or shares and leases, is that competitors will use it in presentations to show their price advantage. Lots of jet card and charter companies do their own buyer’s guides comparing what they offer to others, and I’m not sure if I’ve ever seen one that doesn’t tout the sponsor’s offerings as being X% less than NetJets. So I do understand, by not putting robust pricing and pricing policy information out into the public domain, it makes it more difficult for competitors to say they are comparing their pricing to actual NetJets pricing.
Marquis Jet X-Country Card
With some of their card products, from pricing I’ve seen, I think dollar for dollar NetJets actually may offer a lower price than other companies. For example, its Marquis Jet Cross-Country card gives the user flights in the super-midsize Citation X or Challenger 350 for segments over 3.5 hours. Shorter flights are in a Citation Excel/XLS, technically a midsize jet although it is NetJets’ entry-level jet card aircraft. The flights are all the same hourly rate
Lead Time From 10 to 24 Hours
Depending on the card, lead-time for reservations is 10 hours (Marquis Jet) to 24 hours (Elite), both in the upper league when it comes to flexibility, something that is important if you are traveling on business. At 120 hours for peak days, again
One example was a customer whose daughter was flying back home from South Dakota. Her commercial flight was canceled, so dad called NetJets. It had a repositioning flight in the area and was able to land and have the young lady on her way home in about an hour.
With over 400 aircraft in the U.S. and along with Executive Jet Management and NetJets Europe, over 700 business jets worldwide, the scale is a strength and part of the company’s value.
Poor recovery from mechanicals or other disruptions is the number one reason subscribers give me for wanting to change jet card providers. It’s not something I’ve heard from NetJets users.
Flight Operations Quality Assurance (FOQUA)
It’s the scale that helps power what executives say is an industry-leading approach to safety. NetJets is IS-BAO Stage 3 (as are others such as Delta Private Jets, Jet Aviation, Jet Linx Aviation) and Argus Platinum. It dropped Wyvern Wingman, however, its viewpoint is that none of the third-party raters can provide the rigor of its internal safety focus. There over 150 hours of pre-scheduled C-Suite meetings annually that focus on safety.
One example is FOQA which stands for Flight Operations Quality Assurance, which is based on taking flight data recorder data from the entire fleet from every flight and then using big data to slice and dice it. Among the thousands of data points, it tracks approaches to every airport, including where on the runway the airplane touched down and where it stopped.
Based on that data, NetJets has created its own approaches for several airports, including Truckee, California, and is doing so for a handful more, including Heber City, Utah, and Sedona, Arizona. It has also restricted operations of certain aircraft types to specific runways at some airports.
While passengers would never notice variances in landing and stopping points that led to the changes, that’s the point. Identify minor operational variations that combined with other factors might at some point lead to something more serious – and eliminate them is the goal.
FOQA data is also used in simulator training, and data is used among pilot groups in ongoing competition based on optimizing safe flying practices. Instead of one pilot not wanting to critique another, the idea is teamwork, and also the knowledge that every move on the flight deck is recorded so there is no way to hide mistakes or oversights.
Over 2,500 Pilots
With over 2,500 pilots, NetJets allows pilots to take themselves off a flight for any reason without retribution, including being tired. In fact, in planning flights, NetJets takes into account potential fatigue for pilots analyzing where they have been flying, including crossing time zones. By plotting it out days in advance, operations can plan longer rest times for certain crews while scheduling well-rested crews to pick up a specific flight.
Pat Gallagher, the head of sales and marketing, says few charter operators have that as an option. The operator may only have several of that aircraft type, and the plane is in a far-flung destination. The only option is to delay the flight or fly with a legal, but possibly tired cockpit.
In fact, it’s the relative lack of fatal accidents in private aviation that executives at NetJets believe provide a false sense of safety for both consumers and operators. An example that is often cited in the industry is the Bedford, Massachusetts crash that killed Philadelphia Inquirer co-owner Lewis Katz in May 2014. It was found the pilots did not run a single checklist between engine start and take off, and in 98% of their previous 175 takeoffs, they neglected to do a flight control check.
NetJets pilots work on seven days on, seven days off shifts, with pairings constantly changed, something that the company believes discourages complacency of being too familiar with your flight deck partner.
Get Me The Best Price For Duck a l’Orange
When looking for a good French restaurant, you probably don’t have your assistant call three or four places to compare their price for Duck a l’Orange. And you probably don’t go back and ask if they can knock a few dollars off, or add a free appetizer, however, that is the way some people shop for private aviation solutions. It’s also the typical way companies sell against NetJets. We have cheaper duck, and duck with orange sauce is a duck with orange sauce.
Duck analogies aside, in addition to safety, some factors you need to take into consideration that can impact your actual cash out of pocket cost for flying is deicing
If you are flying in winter weather, deicing can add up quickly – only about a quarter of card programs we analyze, including NetJets, include deicing. When you charter a jet, you pay for deicing, and if it had to be ferried in from another airport experiencing winter weather, you might find you get charged twice for your single flight. For a large jet, you might find yourself paying an extra $15,000 to $20,000 for deicing before you even start your trip!
Peak Day Surcharges
For Marquis Jet brand cards, NetJets doesn’t have a peak day surcharge on its jet cards. While it’s not alone, surcharges can be up to 40%, although more typically 5% to 20%. Still, if you are doing lots of peak day flying – something I recommend trying to avoid for a number of reasons – that higher NetJets hourly rate may actually be closer to your other quotes when you factor in extra charges from other providers. NetJets Elite branded jet cards do carry a 25% peak day surcharge.
Daily Minimums and Taxi Time
Another area where NetJets pricing might turn out to be more favorable than other options is for those of you who have flights under two hours. NetJets daily minimums are 60 minutes, including taxi time. Quite a few providers have two-hour minimums on larger aircraft and while website hourly rates often look great, that midsize jet with a two-hour daily minimum at $6,500 per hour is going to cost you $13,000 at least for that 45-minute flight.
In terms of its fleet, NetJets is constantly taking on new aircraft and exiting older ones. During NBAA last October its CEO Adam Johnson said it had added 230 new jets over the past four years. The types in its jet card program are shares it hasn’t sold on incoming aircraft or shares it has bought back from owners.
Unfortunately for you – and due to its success selling shares and leases – most of the options on jet cards are for types that are either fleet staples or on their way out. In other words, you won’t see the Global Express, Challenger 650, Citation Latitude, Phenom 300 or Longitude when it enters service in a jet card.
At one point last year, NetJets had hinted at a Phenom 300 jet card, but that’s no longer the case, at least now. (Editor’s Note – In August 2019 NetJets added the Phenom 300 as an Elite Jet Card program at $189,000 for 25 hours, including fuel and FET). Still, there are a number of excellent options around the Citation Excel/XLS, Citation Sovereign, Dassault Falcon 2000, Gulfstream G450, Bombardier Challenger 350 and Citation X – one of the fast jets on the market.
Primary Service Area
There are other places that NetJets saves you cash. Its Primary Service Areas for jet cards varies, but for the most part, they include the entire Caribbean, Central America, and Mexico. Most programs have surcharges ranging up to 20%. Others only offer custom quotes, so you don’t get fixed rates. NetJets’ Gulfstream G450 jet card provides ferry free flights to and from Europe. So again, depending on where you are flying, just assuming NetJets is going to be dollar for dollar more expensive could be wrong.
About 30% of NetJets customers get upgraded for operational reasons. What’s more, the upgrades are doled out based on fleet utilization, so jet card customers are granted operational upgrades on the same basis as owners. It also may mean flying on some of its aircraft that aren’t in the jet card program, so a good look-see opportunity when they pop up. A couple of subscribers who shared their NetJets flying with me showed upgrade rates well over 50%.
Private Jet Catering
While NetJets has been investing in wide-ranging upgrades based on how both your taste and what’s being served translate to 45,000 feet, details matter. For example, like quite a few private aviation sellers, customer preferences are noted. However, making them happen sometimes is easier said than done. In one case, operations learned that there was no Amstel Light aboard an aircraft scheduled to take a customer who has it on his list of requirements. What’s worse, the brand wasn’t sold anywhere near that airport he was leaving from. Luckily, there were several other NetJets aircraft parked there so they pooled them and split up the supply so the customer could pop his favorite cold one.
There are no extra charges with catering that is based on the number of people flying and flight time. There is an extensive menu, including local specialties. Owners can order via phone or online. Wines rotate on a quarterly basis, however, NetJets will allow you to order like substitutes without additional charges. While having catering included in the price probably won’t be the reason you choose NetJets, it does provide some savings over many programs.
Probably the best way to understand the investment of NetJets into its operations is to visit its headquarters in Columbus, Ohio. In a large room similar to what you would find at a major global airline is the core of operations, including owner services, schedulers, dispatchers and its own team of five meteorologists who often talk directly with customers to discuss weather issues not directly related to flying. For example, “Is it going to rain there this weekend?” If so, why bother going if you can’t play golf.
It also helps the company plan for disruptions so several days ahead of time they can contact customers and recommend moving departures earlier or later or alternate airports. Nervous fliers are often happy to move flight times if it will mean avoiding bad weather flying.
The company feels the scale and depth of its fleet and operations really comes to light when there are disruptions, helping with faster recovery, and enabling it to assist more customers faster when there are natural disasters, such as potential hurricanes that necessitate customers evacuating themselves, family or employees.
In terms of its vendors, NetJets is constantly auditing and evaluating. That goes down to how FBOs store catering. Vendors that don’t pass muster are eliminated. Major m
State of the Fleet
While NetJets doesn’t provide a specific number for fleet age, for all the new aircraft, some popular types can stay in the fleet for up to 15 years, still relatively young when it comes to the length of service for business jets. About 20% of the active (non-NetJets) U.S. charter fleet is over 30 years old, according to figures provided by NetJets so the point is for the most part you are flying on newer aircraft than the general market.
The company also checks all aircraft when they flow through Teterboro and updates cabins as needed, which can range from a full refresh to replacing specific items such as tables or paneling. I’ve heard from subscribers who say they have run across cabins they think could use a bit more TLC, particularly in the Excel/XLS fleet. I also was speaking to another subscriber who is now looking to return, saying that he found the quality of aircraft he was getting via on-demand charter too hit-and-miss for his tastes.
Consistency is a benefit of NetJets. It configures its aircraft types (with the exception of the Challenger 650 which has a divan option) with like seating arrangements, so unlike many jet card programs, you get a like product from flight to flight.
Another reason jet card buyers will look to NetJets is being able to buy specific aircraft types instead of just categories. For example, there aren’t a ton of GIV, Falcon 2000, Citation X and Challenger 350 options out there.
Who Should Talk To NetJets?
If you come from the school that private aviation is safe, and you simply want the best price to fit your missions, and don’t want to be convinced otherwise, chances are you shouldn’t bother.
If you are looking for turboprop or piston options, NetJets is all jets. Finally, there are no very light jets and no jet card options for a true light jet, although leases can be as short as 24 months and 50 hours per year.
If you are new to private aviation, or you hold safety as a driving factor in your decision-making, then I would highly encourage you to put NetJets on your list. If possible, I would also encourage a visit to its Columbus operations center. With cards that provide 10 hour lead time for reservations and a large fleet, NetJets is also a good choice if you absolutely, have to be there, and need to minimize disruptions as much as possible.
If you fly to Hawaii, the Cross-Country Card or for Europe, the Marquis Jet G450 card could be lower cost than other options in the market, and they bring guaranteed availability and fixed hourly rates. The Cross-Country Card, in general, might price competitively if you use it exclusively for flights of over 3.5 hours. If you are doing winter weather flying, the fact that NetJets includes deicing could be a significant saver. Same thing when it comes to shorter flights with daily minimums of 60 minutes that are taxi time inclusive.
According to Argus TRAQPak, NetJets clocked four times as many fractional flight hours as second place Flexjet last year. Having added 230 jets in four years, clearly, NetJets is maintaining its leadership position although Flexjet is trying to carve a position with long-range aircraft.
While NetJets keeps program pricing and many details close to the vest, at the end of the day, it seems to be working. Do I believe NetJets could gain even more customers if they provided more details upfront? Yes, although they do provide quite a bit of data to Private Jet Card Comparisons not available on their website. I think it shows they understand that people are going to look at various options.
That said, NetJets is a compelling option, if not for everyone. Of