Saturday, July 9, 2016

NetJets hopes for business boost by discounting longer flights -The Kathryn Report

It won't make private air travel affordable for the masses, but a new program from Columbus-based NetJets hopes to attract more customers who would be choosing other options when flying cross-country or across the ocean.

The Berkshire Hathaway-owned firm has long been the world's largest private jet firm, with a current fleet of about 700 planes, but finds itself competing for a pool of business that is still smaller than it was before the recession.

The recently launched program discounts the per-hour rates that the company's fractional-share owners would pay for longer-haul flights. NetJets pioneered the fractional-ownership concept, which works much like a time-share for private jets.

"For as long as I can remember, our average segment length (flight time) has been two hours," said Patrick Gallagher, executive vice president of sales and marketing for NetJets. "When customers are flying coast to coast or to Europe, they're often using other means.

"There are efficiency gains that we get by flying longer routes in terms of better utilization of planes and crew scheduling. It's really a win for both the customer and for NetJets if we can get more of that business."

The upfront cost of buying an ownership stake will remain the same — roughly a half-million dollars and up, depending on plane type and the size of the share — as will the monthly management fee, which covers ongoing operating expenses such as owners services, insurance and hangar-rental fees.

Where owners may be able to save thousands of dollars per flight is in the so-called occupied hourly rate: NetJets will discount those costs by 30 percent for qualifying cross-country flights and 40 percent for transatlantic ones.

According to Cincinnati-based private-aviation research firm Argus International, cost per flight hour can range from $2,100 to $5,000 depending on aircraft type and fractional company. That means an owner could easily save more than $10,000 on a NetJets flight of at least 5 hours' duration.

Scott Liston, a former NetJets executive who now is executive vice president for Argus, said the program should prove popular and address market demand.

"Traditional fractional did not factor in cost benefits that come with these 'long-leg' flights. Tthis program will do that," Liston said. "It's similar to other charter and jet-card offerings in the marketplace ... and seems to be a very attractive program for the consumer."

Gallagher said it's too early to gauge response, but he predicts the program should prove popular since it was implemented in response to requests by current and prospective owners. He said NetJets' share of the steadily growing private-jet market has remained steady in recent years and the new program isn't in response to any one competitor, though newer fractional companies such as FlexJet as well as charter operators such as Wheels Up, which is expanding its office in Worthington, have continued to go after businesses and individuals seeking private air transportation.

About 10 percent of NetJets flights are transcontinental, Gallagher said. If owners increase the length and frequency of their flights, they're also more likely to purchase a larger share — a 1/16 share provides 50 hours of flight time per year, while a 1/8 share provides 100, for example.

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