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SAGE OR SUSPECT

SAGE OR SUSPECT

Walter Kraujalis

President, AeronomX
727.233.3429 www.aeronomx.com

In June, NetJets announced plans to purchase as many as 425 new business jets from Bombardier and Cessna. The order includes firm commitments to buy 125 aircraft and options to purchase the other 300. Deliveries will begin in 2014 and continue for the next 10 years. Walter Kraujalis, president of AeronomX, sees the order as a positive sign for NetJets and the private-aviation industry as a whole.

The order has been covered widely by the media, and the opinions about Warren Buffett [chairman and CEO of Berkshire Hathaway, which owns NetJets] and his decision to OK the order have ranged from clairvoyant to crazy. I think it’s somewhere in between. He’s just taking care of business. It’s a fleet-replacement plan. This is a key time to buy because the market is soft. It seems like a prudent plan to me.

I’m not sure what the future holds for fuel prices; they might stay the same or they might go up. Either way, it’s all about operating economically and efficiently, and the new models do that. When choosing a private-aviation provider, corporations want to know who has the better hourly rates. You will have the better numbers if you have the newer jets, and NetJets will have the newer, more fuel-efficient models.

Options make up a large portion of the order, but the firm orders are NetJets’s best conservative guess of what it will need. And NetJets holds the options so that it isn’t caught without orders if things prove wonderful. NetJets had to show Bombardier and Cessna that it can pull off the purchases. You can bet those companies vetted the buyer. They’re not going to make the same mistake that Eclipse Aviation made when it accepted orders from DayJet [a start-up air-taxi service that went out of business in 2008 after taking delivery of only 28 of the 1,400 Eclipse 500 very light jets it had ordered or planned to order].

The NetJets order is a clear sign that business aviation is not going away and that NetJets is strong enough to justify the order.