NetJets is continuing its fleet overhaul with the newest round of orders, which, at up to $9.6 billion, mark the largest in the company’s and industry history and continue its track of selecting newer technology aircraft that are customized for the fractional ownership provider.
NetJets’ order for up to 425 newLatitude and Challenger jets, which was announced late June 11, will be used to establish a new “Signature Series” of aircraft and also help round out NetJets’ midsize and super midsize category.
But this may not be the end of NetJets’ new shopping spree, with Chairman and CEO Jordan Hansell saying, “This will not fully complete our transactions.” However, he notes that further commitments will depend on market conditions.
NetJets revealed its initial plans for its fleet overhaul in October 2010, when it placed an order for up to 125Phenom 300 light jets. Then in early 2011, it shifted to the long-range, large-cabin category with a $2.8 billion order for a mix of Bombardier Global aircraft.
The latest order will put the Berkshire Hathaway-owned fractional provider in head-to-head competition with Bombardier’s own Flexjet fractional ownership operation, whose fleet also includes Challengers.
Role of Trade-Ins
In addition, rapidly growing San Francisco-based on-demand carrier Xojet has built its fleet around the Challenger 300 and Citation X.
Monday’s announcement includes 100 firm orders for the Bombardier Challenger jets and options for 175 more. Of that number, 75 are firm orders and 125 options for the Challenger 300 series, with deliveries scheduled to begin in 2014. Hansell in a conference call with reporters said that the order was not specifically for the Challenger 300, but a variant modified for NetJets.
The remaining Bombardier contract includes 25 firm orders and 50 options for Challenger 605s, with deliveries to begin in 2015. Hansell valued the Bombardier portion of the newest order at $7.3 billion.
NetJets also placed firm orders for 25 Cessna Latitudes and options for another 125 with a total value of $2.3 billion. Deliveries of this new model, now in early development, are planned to begin in 2016.
Hansell would not comment on the specifics of this new deal, notably the inclusion of trade-ins, which are widely believed to have played a significant role in the earlier agreements with Bombardier and Embraer.
The new orders are part of NetJets’ “10-year business plan, which includes continuous renewal of its current fleet of more than 725 aircraft,” the company says. The contracts were designed so the orders could either expand NetJets’ fleet or simply replace existing aircraft over the next 10 years, depending on market conditions, says Hansell.
He adds that the fractional market has been slowly improving “from a very low base” that was dramatically affected by the global economic downturn that started in 2008.
As for moving into head-on competition with Flexjet, Hansell says the decision was made more than two years ago to look for the best available aircraft and that the competitive aspects were not a factor in the negotiations.
The new fleets all are tailored to NetJets specifications. The fractional ownership provider says the Signature Series marks the first time it will have helped design the aircraft “from start to finish” covering everything from interiors, including cabin entertainment packages to equipment in the cockpit.