Jet Owner

Dec 27, 2009

Following NetJets' announcement in late November of furloughs starting January 15th, the company has been forced to cancel large orders of aircraft and concentrate on the more burgeoning areas of their business. At the same time, signs of the end of the recession coupled with a loyal following clash with no such signs for the fractional ownership business itself.

Category: Fractional

The company back in mid-November rescheduled the delivery of 56 Falcon aircraft (2000LX and 7X models) ordered from 2006 to 2008 from Dassault, a manufacturer already going through a tough time due to the recession and a weak dollar, pushing the start date of deliveries to the year 2014. Dassault is treating this rescheduling as cancellations due to NetJets' refusal to make firm commitments. Similar action was taken on December 16th when they cancelled $2.6 billion worth of orders with Hawker Beechcraft, although that manufacturer wasn't hit as hard as Dassault.

Meanwhile, NetJets is focusing on the European and Middle Eastern branches of their business. NetJets Europe's new state-of-the-art Web site went live early this month, pumped full of new features that let users explore their fleet and the airports they fly to and fro including a Virtual Walk-Through section. NetJets Middle East restructured its program to increase accessibility and ease for customers old and new. The move seems to have worked according to Graeme Deary, executive director for business development at NetJets Middle East, who in a statement said "we have had a very strong year and we are expanding. Despite all you have read, it is far from the end of fractionals. There is a far greater opportunity than with charter" and spoke of NetJets' interest in expanding to serve China.

That springs the question, will fractionals survive? Well, things are starting to look up for the general aviation industry, indicating that the downturn is slowly coming to a close. Flight operations and used aircraft sales have been growing for the past few months according to AMSTAT data; business aircraft activity was up 22.7% in November year-over-year according to ARG/US and TraqPak data as well, and in that same month, for the first time in a year, the number of aircraft orders received by Bombardier Inc. was higher than the number of cancellations.

There is also no doubt that fractional ownership still has its followers. Major construction work to expand the Columbus Regional Airport in Columbus, Ohio, is being funded by the Columbus Regional Airport Authority and state grants to help keep NetJets' headquarters in that city. Additionally, the 4th Fractional Life Expo is already slated to take place from September 13th to the 15th, 2010, in London, England. An article on the announced expo reads "fractional ownership is benefiting hugely from increased consumer awareness, propelled by current budgetary constraints on luxury ‘whole ownership' goods."

However, the ARG/US and TraqPak data still shows a year-over-year decrease of 3.6% in fractional light jet operations in November, and a combination of reliance on continuous sales and concentration of the U.S.A.'s wealth in the hands of fewer and fewer people could still potentially be a threat to their North American branch. The future remains uncertain for NetJets.

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