NetJets' earnings fall on a 27% decline in flight hours

By Doug Gollan, February 27, 2021

Berkshire Hathaway’s Service group, which houses NetJets and Flight Safety, saw revenues drop by $1.15 billion (8.5%) in 2020 compared to 2019. Pre-tax earnings decreased $81 million (4.8%)

The world’s largest private jet operator, NetJets, Inc., saw a drop in flight hours and pre-tax earnings, according to Berkshire Hathaway’s 2020 annual report, released today.

NetJets and Flight Safety see revenues fall 13.5%

According to the report, “Service group revenues declined $1.15 billion (8.5%) in 2020 compared to 2019, and pre-tax earnings decreased $81million (4.8%). Pre-tax earnings of the group as a percentage of revenues were 13.0% in 2020 compared to 12.5% in 2019.”

It continued, “The aggregate revenues of NetJets and FlightSafety in 2020 declined $816 million (13.5%) compared to 2019, reflecting lower demand for air travel and aviation services attributable to the COVID-19 pandemic. NetJets experienced a decline in flight hours of 27%, and FlightSafety’s commercial and corporate simulator training hours declined 30% from 2019.”

Private jet market share 2020

Argus TRAQPak figures for flight hours, including both NetJets and Executive Jet Management, previously noted the drop in flight hours.

Despite the decline, NetJets, Inc. continued to have a solid grip on its footing at the top of the mountain. Its 336,252 flight hours in North America was more than the next three largest providers combined. Still, NetJets’ lead over Directional Aviation’s Flexjet was trimmed from 332,195 hours to 201,771 hours.

At the end of 2020, NetJets market share of Part 135/91k flight hours was 18.3% and 9.6% of total flight hours.

The Berkshire annual report noted, “The (Service group) decline in earnings reflected lower earnings from NetJets, TTI, and CORT and from the effects of the divestiture of the newspaper operations, partly offset by higher earnings from XTRA, Business Wire, WPLG, and FlightSafety.”

- NetJets, Flexjet, Wheels Up, Vista Global, and Jet Linx top the 2020 Part 135/91k list of biggest private jet operators 
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- Private Jet Flight Activity by State, Region, and Quarter - Most Popular Private Jets by Size 
- New Private Jet Deliveries by Manufacturer and Type (2015 to 2020)

Regarding its private jet operator, Berkshire said, “The decline at NetJets was primarily attributable to increased asset impairment charges and restructuring costs, partly offset by lower general and administrative expenses and a slight net increase in margins.”

It was a switch from 2019 when Service group revenues increased $163 million (1.2%) compared to 2018. That jump was “primarily attributable” to increased TTI sales and higher aviation-related services revenues NetJets and FlightSafety.

In 2019, earnings gains at NetJets were attributed to increased revenues and improved fleet and operating efficiencies, which improved operating margins.

It also appears NetJets is on track to continue building its fleet by taking delivery of new private jets. Some $48.4 billion in future purchase commitments include “fuel, capacity, transmission and maintenance contracts and capital expenditure commitments of BHE and BNSF and aircraft purchase commitments of NetJets.” There are $14.5 billion in commitments for 2021.

NetJets headcount declines

According to the report, NetJets had 6,218 employees at the end of last year, down from 6,476 in 2019. There are 360,174 companywide. In terms of other Berkshire units, NetJets had the 14th most employees. It was behind GEICO with a headcount of 42,156, followed by BNSF Railway (35,225), Fruit of the Loom (29,307), McLane Company (24,304), Shaw Industries (20,806), Marmon (20,302), Precision Castparts (19,944), Clayton Homes (19,455), IMC (12,866), Forest River (12,611), Berkshire Hathaway Automotive (9,206), John Manville (7,709), and TTI (7,279). There are only 26 people in Berkshire’s famously skinny corporate office.

Looking back to the 2019 annual report, NetJets’s increased revenues were attributed to more lease revenue and increased flight hours. On the downside, it pointed to lower revenue from prepaid flight (jet) cards. From late 2019 NetJets has been expanding its Marquis Jet card offerings. It added the Phenom 300, Sovereign, Latitude, and Challenger 650 and 350 to its lineup.

NetJets didn’t get a mention in Warren Buffett’s famous annual letter to his shareholders this year.

A newsworthy year at NetJets

NetJets was constantly making news during 2020. In April, it restructured its Marquis Jet Card program, eliminating fuel surcharges and cutting rates. It also added the Citation Latitude, Challenger 350, and 650 to its jet card lineup. Minimums on its Latitude, XLS, and Phenom 300 types were eliminated, reducing the cost of sub-60-minute flights.

It also changed course after grounding older aircraft in its fleet and furloughing employees at the COVID pandemic’s outset. It announced plans to add 60 new private jets through 2021 and a recall at the end of July. NetJets helped signal the industry’s V-shaped ebound, announcing May was its best month for new customer acquisitions since 2008.

During the Fall, NetJets made sustainability a key pillar of its communications, bringing together diverse initiatives. It also published a rate card to buy carbon offsets and built the option into all corporate proposals. Earlier this year, it said it was investing in a producer of sustainable aviation fuel.

By November, its president Pat Gallagher predicted a return to pre-pandemic flight levels by the second half of 2021. It also took the top spot in all categories of Business Jet Traveler’s annual reader survey awards.

CARES Act relief for private aviation

NetJets was one of the few large operators not to apply for CARES Act relief. Still, it took several public swipes at rivals for doing so. The approach drew return fire. FlyExclusive owner Jim Segrave said, “While our customers are often high net worth individuals or large businesses, our pilots, mechanics, line technicians, dispatchers, accounting and support staff are all hard-working Americans. We are thankful and proud to have been able to maintain hundreds and hundreds of jobs with the support of the PPP program.”

Directional Aviation’s principal Kenn Ricci also blasted NetJets without naming his instate rival. “This is not about propping up a service for the wealthy, as some have inaccurately portrayed it. It’s about preserving the jobs of thousands and ensuring that an industry that touches Americans across all income levels and geographies continues to thrive in a post-pandemic world,” he said.

Berkshire Hathaway notches $42.5 billion in 2020 earnings

Overall, Berkshire Hathaway earned $42.5 billion in 2020. That includes $21.9 billion of operating earnings, $4.9 billion of realized capital gains, a $26.7 billion gain from an increase in the amount of net unrealized capital gains that exist in the stocks it holds. There was also an $11 billion loss from a write-down in subsidiary and affiliate businesses’ value.

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