NetJets - It s More Than Just an Airplane

NetJets ” It s More Than Just an Airplane

In NetJets, former Goldman Sachs leasing specialist Richard T. Santulli has combined a fleet of high-quality aircraft, state-of-the-art information systems, well-trained, highly skilled employees , and an unfettered access to capital to create a time-share system for private planes that competing offerings cannot match.

NetJets offers shares, ranging from one-sixteenth to one-half, in a variety of private planes. Customers bear fixed costs proportionately and pay incrementally only for the variable costs they incur, such as the flight hours utilized. For example, a one- eighth share in a seven-seat Cessna Citation V guarantees a hundred hours of use and costs $664,000 up-front, plus $8,800 in monthly maintenance expenses and $1,373 for every occupied flight hour . ^[12] For most of us this is a rather expensive travel alternative. But the option to pay only for capacity used while retaining the feel of full ownership has become wildly popular among wealthy individuals seeking periodic access to private planes and corporations seeking to supplement normal lift requirements.

NetJets combined arms approach begins with a world-class fleet of five hundred aircraft, ranging from seven-seat Cessna light- cabin models to more luxurious eighteen-seat Boeing business jets . All planes are completely refurbished every thirty months, and many come equipped with amenities such as DVD players, desks, telephones, kitchenettes, and wet bars. ^[13] In addition to a comfortable ride, NetJets provides near-ubiquitous access to airports and landing strip services at five thousand airports on three continents ”North America, Europe, and Asia.

Balancing available fleet capacity with wide swings in demand and coordinating the myriad activities necessary to support shared ownership requires a second arm ”sophisticated information management capabilities. IntelliJet, NetJets comprehensive aviation management system, seamlessly connects administrative, operations, and support functions, matches planes to customer reservations , and shuffles crew assignments. Managers can use the information the system collects to develop advanced schedules, order aircraft, optimize pricing, and structure leasing plans. Finally, an advanced customer relationship management system (CRM) that tracks each customer s plane usage allows NetJets to pinpoint each customer s particular needs and preferences. With this information crews can custom-tailor meal offerings and cabin setup to meet individual tastes.

To complement its world-class fleet and state-of-the-art systems and ensure the highest levels of service, safety, and reliability for its discriminating customers, NetJets relies heavily on a third arm ”a skilled, trained, and motivated workforce. Dedicated service teams are assigned to specific customers in an effort to cultivate and maintain ongoing relationships. NetJets personnel closely track and cater to their clients specific needs and proactively reach out to clients in case of any flight or aircraft changes. Operations personnel at the company s two-hundred-thousand-square- foot aviation center in Columbus, Ohio, vigilantly guard against unexpected contingencies, such as bad weather and airport delays, to ensure that planes arrive to clients within the guaranteed four- to six-hour window. ^[14] Pilots have, on average, eight thousand hours of flight experience, fly just one jet model, and receive an additional twenty-three days of simulator training per year, double that of a typical airline. And all mechanics hold certifications from the aircraft manufacturer whose jet they service.

As heavyweight competitors , such as Raytheon and Bombardier, have challenged his company s lead in the market he created, Santulli has added a fourth arm ”access to capital. Satisfied NetJets customer Warren Buffett ” sticking to his tried-and-true practice of buying companies whose concept he understands and whose management he admires ”bought the company in 1998 for $725 million and kept Santulli as CEO. With financial backing from Buffett s Berkshire Hathaway, Inc., Santulli has been able to maintain his lead by upgrading and expanding his fleet at will and investing in whatever is necessary to provide the safest and most reliable travel management service for our customers. ^[15]

Since the genesis of its time-share system of ownership in 1986, NetJets combined arms approach has enabled the company to amass thirty-five hundred clients and become the world s largest operator of private business jets, with a presence in about a hundred countries . Boasting an enviable list of satisfied customers, among them Buffett, Tom Hanks, Tiger Woods, and Arnold Schwarzenegger, NetJets enjoys the lowest customer turnover rate and highest customer satisfaction rates in its industry.

Leadership Lessons

By virtue of Santulli s masterful combination of mutually reinforcing arms ”planes, information systems, personnel, and capital ”NetJets has tapped previously unrealized market potential and placed established rivals on the horns of a dilemma. Large commercial airlines cannot compete with NetJets on the basis of convenience or timeliness; NetJets clients never have to worry about transferring planes, waiting in airports, or going through long safety checks. Nor can charter airlines, which typically require considerable advance notice to reserve and do not offer comparable flexibility of ownership. Full ownership of a private plane cannot compete on the basis of cost, service, or ease of use; NetJets minimizes the idle time of unutilized aircraft and removes the anxiety and expense associated with maintaining a plane and managing a full-time crew. And would-be imitators lack the capital, management savvy, advanced information systems, or scale to topple NetJets from its market-leading position.

^[12] Pricing from NetJets 2003 brochure.

^[13] Bettridge, Jack, Inside NetJets Control Room: How They Manage the World s Sixth Largest Airline, Cigar Aficionado Magazine , July/August 2002.

^[14] Moskal, Brian S., Up, Up and Away, Aviation Magazine , June 17, 1995, 17.

^[15] www.netjets.com, April 2003.