NetJets’ recovery skies despite Europe
Jordan Hansell, chairman and CEO of Columbus-based NetJets, isn’t on anyone’s list of Berkshire Hathaway executives poised to succeed Warren Buffett. That’s fine with him.
After two high-profile NetJets CEOs who were considered possible successors to Buffett abruptly left the company in the past two years, Hansell, a soft-spoken 41-year-old former lawyer, is at the controls.
Hansell has run the world’s largest private jet operator since April. Picked by former CEO David Sokol to succeed him when Sokol left Berkshire amid questions of possible trading on insider information, Hansell has taken a steady, low-profile approach to continuing the business plan laid out by Sokol in his 19 months at the helm.
The good news for NetJets: The company continues to sell off excess aircraft, add owners of its timeshare-like fractional shares and log increases in hours of flight time by owners.
The bad news: NetJets’ recovery has been slower than had been hoped a year ago.
Activity in Europe, which accounts for about a quarter of NetJets’ business, has been down significantly in recent months as the European debt crisis has roiled financial markets there.
“It’s a very difficult economic environment, on the level of what happened in 2008 in the U.S.,” Hansell said of the European situation. “It’s going to be slow for some time.”
NetJets’ much-smaller joint venture in the Middle East ended recently. Hansell said the company expects to enter a new partnership arrangement in the region in the future, but for now it will continue to serve those customers through Europe.
The groundwork for NetJets China continues to be laid, including the hiring in the summer of Eric Wong as CEO of that division. The unit still requires approval from the Chinese equivalent of the Federal Aviation Administration, which Hansell hopes might come this year.
Meanwhile, “the U.S. has bubbled along” in 2011, Hansell said.
After seeing sales gains of 8 percent for fractional shares and 6 percent for Marquis Jet 25-hour cards in 2010, NetJets has gained about 80 new fractional owners in 2011 and had about 475 new sales of Marquis cards. NetJets acquired Marquis, formerly a separate company, in November 2010. Rather than sell shares of a plane, the Marquis program sells access to planes by the hour.
NetJets moved its official headquarters to Ohio from New Jersey in 2009. Since then, it has brought more than two dozen information-technology jobs to Columbus from India and is looking to fill another couple of dozen positions.
Under Sokol’s cost-cutting measures, NetJets laid off more than 800 corporate employees across the country, plus 495 pilots who remain furloughed.
Work on NetJets’ new home at Port Columbus continues. In March — two months ahead of schedule — NetJets plans to start moving the 500 employees now in leased office space at Easton to its new $21 million building next to its longtime operational headquarters at Port Columbus, which is already home to 800 employees working in round-the-clock shifts.
NetJets has faced continued discontent among workers who have been unhappy since Sokol undertook layoffs in 2009.
Some, including pilots union chief Mark Luthi, have suggested that the company is sacrificing safety for the sake of profits, something management has strongly denied.
In 2010, NetJets hired Cincinnati-based Aviation Research Group/U.S., known as ARGUS, to conduct safety audits against the standards of three organizations: ARGUS itself; the International Civic Aviation Association’s (affiliated with the United Nations) International Standards for Business Aircraft; and the Flight Safety Foundation’s Basic Aviation Risk Standard.
NetJets received the highest rating on all three measures.
Scott Liston, the Columbus-based executive vice president of ARGUS and a former 16-year employee of NetJets, said NetJets is one of only three companies in the U.S. that have gone through all three certifications, and it is the only one to successfully do so in a single auditing.
“I worked there for 16 years, so I’m probably biased, but even with everything they’ve been through as a company … it’s been proven that it’s the culture of a company that either permeates safety or challenges safety. NetJets doesn’t put on a show when it comes to safety; they really live it.”
Barring more financial earthquakes, Hansell expects slow but steady growth this year. The company has ordered nearly $8 billion worth of new aircraft in the past 14 months, with another large order or two to come soon.
Hansell emphasized that the purchases are the result of long-range planning, not a sign that the company expects explosive growth anytime soon.
“We want to be a steady performer for Berkshire,” Hansell said. “We’re focused on providing the safest option and highest level of service in the industry.”
