NetJets Announces Major Pilot Layoffs
In a November 12 article on AIN Online Matt Thurber reports the following:
“Revenues at NetJets, Berkshire Hathaway’s fractional jet share company, dropped $471 million (41 percent) in the third quarter of 2009 and $1.495 billion (42 percent) for the first nine months of 2009, compared with 2008 results, according to the parent company’s November 6 quarterly report. The decline in revenues stems from a 79-percent drop in aircraft sales, according to the report, and a 24-percent reduction in flight revenue hours.”
Other recent news on NetJets says that they are firing 495 pilots out of 3000 employed worldwide.
The numbers are staggering: 42% loss in revenue and 79% drop in aircraft sales year over year. Will the revenue and new aircraft sales for this company bounce back to what it was?
NetJets hopes to make a profit in 2010 but only through severe cost-cutting measures which includes the loss of a lot of jobs.
I see no vision from the management about how they are going to grow and prosper in the next 10 years. There is no economic recovery news here that shows new jobs. Without new jobs we don’t have an economic recovery in business and general aviation!
I was hoping we had hit the bottom in business aviation but it seems there may still be some room below, at least in some segments of our industry.
I hear mixed comments out there from our peers in the business with some saying they are seeing a trend back up in sales activity and flying while others are saying that they wish the phone would ring. Is the glass half full, half empty, leaking like a sieve, or filling back up?
The old ways of doing business and especially the old pricing models are not going to work in the new economy. It seems to me there has been a complete reset.
There will still be people and businesses around who will pay the high prices for business jet flying but not as many as there were 18 months ago. You can bet that those who sold their jets or quit flying by private aircraft for economic reasons are going to be looking for new pricing models before they jump back in. And to add to the problem, it appears to me that many who lead in our industry are thinking in terms of the scarcity of the existing market and not the abundance of a whole new market created by innovation.
I believe those whose glasses will start filling back up from the half-full state are the ones who aggressively seek ways to change the business model of private air travel. Those who don’t may wake up with an empty and broken glass.
I want the full glass again. How about you?
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- Nov 17, 2009: uberVU - social comments
Right now the glass is cracked, but much of the leaking has stopped, except in the fractional world. The fractional business model is simply “broken” as a result of a perfect storm of a bad economy, bad press and a credit crisis. Fractional models are based on selling “new” shares on “new” aircraft and apart from the Phenom and few of the light jets, there is simply very little demand for new jet aircraft. You also have the additonal pressure from a used jet market that is awash with inventory, this has put further downward pressure on prices. Under the fractional model, a share owner expects a certain level of resale value and its VERY difficult to guarantee that given the current market. I argued at least 2 years ago that the market was saturated in the fractional world and that the growth seen from 1999-2005 was simply unsustainable.
What is needed is more than just cost cutting. You can only shrink so much until you reach zero. There is still a market out there for people who want ot fly privately. Yes, that market is not as large as it was, but those companies that are smart and especially creative in their marketing approach will be the ones who survive and thrive. At the same time, the strengths that make each company great should be enhanced. This includes everything from customer and client service, pilots and crew interactions,safety culture and of course, the use of new media outlets. I think its important for any aviation company to be able to differentiate itself from its competition. The pie may be smaller, but a substantial “piece” of that pie can be obtained with a new and more modern business plan, fully aware of the new realities of the market. Only then will the glass begin to fill.