In 1986, Buffett bought an $850,000 used Falcon aircraft. As he had become increasingly recognizable, it was no longer comfortable for him to fly commercially. The idea of the luxury was hard for him to adjust to, but he loved the jet immensely. The passion for jets eventually, in part, led him to purchase Executive Jet in the 90's. Still, at many shareholders meetings he called his plane “the indefensible.” He sought a means he could enjoy the privileges of ownership without the high costs.
Enter 9/11 and post 9/11 aviation. Commercial air travel, even first class, is a bust. Long wait times, airport security, flight delays, cancellations, you name it. You can only rarely count on getting to your destination on time. The stress of flying has gone up at least 1000 fold.
Is there another way? Sure, if you’re Warren Buffett, you buy a plane. But most of us can only dream that fantasy. But there is another solution.
That’s why NetJets was developed. Through fractional ownership or through purchasing yearly hours, NetJets has become the solution for thousands of business flyers. Simply stated, fractional ownership has changed the lives of anyone flying for business: It has changed the way they work, providing more time and ability to go to more places. It appeals to those who are looking to grow their business, balance the demands of their business, enjoy more time with their families, or those hoping to bring new meaning to the word retirement, NetJets provides a very nice answer.
You’re probably wondering who NetJets is and how they were founded. In 1986, Richard Santulli, chairman and CEO of NetJets Inc., considered buying a personal jet for his own use, which would be managed by his company. After determining he’d fly 100-150 hours annually, he realized he could not justify the cost of acquiring and operating the plane. He considered the possibility of sharing the plane with three other friends, but it became readily apparent that the very reasons for having his own jet – namely, leaving when you want to, going wherever you want – were negated by having three other owners. Needless to say, the boundaries of their friendship would have been stretched.
Santulli then realized that, if he could design a private aircraft program that combined the economics of ownership with guaranteed service, he would create something with enormous marketplace potential. He called the idea fractional aircraft ownership and NetJets (formerly Executive Jet) was born. And in 1998, Warren Buffett – a delighted NetJets customer- acquired the company, and NetJets was thrilled to become part of Warren Buffett’s family.
How the NetJets Programs Work
One program NetJets offers is fractional aircraft ownership. A fractional owner doesn’t buy shares in a corporation or invests in a partnership deal they actually purchase an interest in a specific aircraft. The size of the interest depends on the number of hours that the buyer intends to fly in a year. Specifically, each 1/16 interest entitles the owner to 50 flight hours per year. The owner is only charged for the hours actually flown. But if two owners want the plane at the same time, they will get their plane or a comparable one, guaranteed.
Other advantages are that costs are predictable for 5 years and at the end of the contract term, there is a guaranteed buyback of the owner’s interest at fare market value, less a remarketing fee.
The second option is the Marquis Jet card, designed for individuals flying less than 50 hours per year. It represents a sublease of a NetJets fractional owner share.
So who flies NetJets? Warren Buffett, of course, and Tiger Woods, Annika Sorenstam, Andre Agassi, Roger Federer and companies such as General Electric, Prudential, and The Dow Chemical company.
So here are the advantages:
- The owners needs are first accessed, realistically
- The owner can buy as much as he needs
- The owner can travel on their own terms, whenever they want to
- Access is available to the entire aircraft fleet of over 750
- NetJets sets the safety standards for the industry and safety is never compromised
- Fractional ownership and the Marquis jet card allows efficient use of capital
- Expenses are predictable
- There is guaranteed liquidity and availability for passengers
- Travel aboard private aircraft offers enhanced security and privacy
Examples of Costs
A Hawker 400XP acquisition cost would be $416, 625 for 1/16 ownership (50 hours flying). An additional monthly management fee (which includes pilots salaries, training, insurance, hangaring and an administrative support) of $7,469 plus $1,786 occupied hourly fee (which covers costs such as fuel, maintenance, catering and landing fees.
NetJets also offers a NetJets Marquis Jet card. The card is sold as a prepaid lease offering 25 hours of occupied flight time. It is ideal for individuals and businesses that want the benefits of personal air flight but not the higher costs. In general, it’s best for those flying 25- 50 hours a year. A card for 25 hours on the Citation V Ultra starts at just $126,900 and $244,900 for 50 hours.
For more information call 1-877-NETJETS or visit their website at www.netjets.com
