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. Bill Quinn, managing director of Charleston Aviation Partners, is not sold on the transaction.
Most of the NetJets order consisted of options to buy. I have always been an advocate of NetJets and the services it provides to our clients, but just because it placed an order doesn’t mean it’s going to be in business for a long time. While NetJets is still considered by many to be the 800-pound gorilla in the fractional-aircraft world, many of us in the industry question where [NetJets chairman and CEO] Jordan Hansell is taking the company in the days ahead.
I’m still scratching my head on Cessna’s decision to drop its fractional program. [In February, Cessna’s CitationAir stopped selling fractional shares and ceased renewals for current fractional-share owners. Initially the company indicated it would focus on its jet card program and its established aircraft-management business.] Now it is abandoning the jet card program, and the business model for the aircraft-management program is still somewhat of a work in progress. I understand the business-school model of sticking to what you do best, which in Cessna’s case is building aircraft. But for Cessna to get out of the fractional business seems like a bad move to me.
It has several hundred fractional owners—and somewhere in the vicinity of 50 aircraft—and all of them are potential buyers of Cessna products and services. It poses a compelling question: Where is [Cessna president and CEO] Scott Ernest taking the company?
The most stable fractional company seems to be Flexjet [owned by Bombardier]. It’s a smaller, more boutique operation. And while Flexjet is more expensive than other providers, Bombardier clearly sees value in putting people in its products.