NetJets signed a record agreement with Textron Aviation for purchase options of up to 1,500 Cessna Citation business jets over the next 15 years. NetJets will also serve as Textron's launch customer for the new Cessna Citation Ascend, with deliveries to begin in 2025. Jeremy Kariuki, Aviation Week associate editor for business aviation, and Molly McMillin, managing editor for business aviation, discuss the agreement. 

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Rush Transcript

Jeremy Kariuki: Hello, and welcome to the BCA Podcast. I'm Jeremy Kariuki, associate editor of business aviation. And I'm here with my colleague, Molly McMillin, managing editor of business aviation for Aviation Week Network. Today we are discussing NetJet's record-breaking agreement with Textron Aviation for options for 1,500 Citation jets over the next 15 years, and what it means for both companies. Before we get started, remember to subscribe to the BCA Podcast on Apple Podcast, or on your app of choice. Molly, welcome back to the show.

Molly McMillin: Thank you, Jeremy.

Jeremy Kariuki: To start out, NetJets is a fractional ownership provider, and Textron ... They've had a 40-year relationship with them, but this is the longest and largest agreement for aircraft options in their history. Could you explain what this deal contains?

Molly McMillin: Sure. It was an agreement that was announced September 20th, that it gives NetJets the option to place orders for up to 1,500 aircraft over the next 15 years. Now, these are options and not firm orders, at least not yet. It hones in on Textron's Cessna Citation Latitude, midsize jet, the Citation Longitude, the super-midsize jet, and the new Citation Ascend. It includes options for an increasing number of jet deliveries each year over time, so it's a very significant milestone in the history of both of those companies. So, the transaction extends NetJet's current fleet agreement for Citation Latitude and Citation Longitude midsize jets. Textron Aviation will continue to deliver those two models on firm orders to NetJets. But the new agreement, of course, does not include the firm orders, but options.

Jeremy Kariuki: And with this deal, does NetJets also become the launch customer for the Citation Ascend?

Molly McMillin: Yes. They asked to be the launch customer, according to Textron Aviation. Textron announced the Ascend at EBACE back in May, and it replaces the Citation XLS Gen2 in its product line, with an all-new cockpit, improved performance, upgraded cabin. Deliveries are expected to begin in 2025. As a comparison, NetJets operates more than 75 Citation XLS aircraft in its fleet today, according to Aviation Week's data.

Jeremy Kariuki: And what does this deal mean for Textron Aviation, specifically?

Molly McMillin: Well, Textron Aviation calls it confirmation of the success of its products. For one, NetJets is a huge customer. Over the past 40 years, NetJets has taken delivery of more than 800 aircraft from Textron Aviation. Today, its entire fleet is about 700 aircraft, not quite, in all. But more than half of that fleet, 356 jets, are Citation Latitudes and Longitudes for Textron.

Jeremy Kariuki: Wow. And what does this mean for the production and the jobs in this area of the industry?

Molly McMillin: Well, for one, it's a big part of the company's production schedule. Right now, 55% of all Citation Latitudes in service today are in operation at NetJets, along with half of all the Citation Longitudes in service today. For production and jobs ... The two parties have been in talks for some time. So even though it's new to the world, it's been in the works for quite a while with both companies, and so it's already considered in the company's production plans.

So, if NetJets converts all the options into orders ... Simple math would say that'd be 100 airplanes a year. Although, realistically, production would ramp up over time. In the last five years, for example, they've taken an average of about 30 Citations a year. 42 last year. This year they've taken 26 or so, so far. For jobs, it's good for Wichita, where I live and where Textron is based. It's good for the city and the economy. Textron has been hiring about 2,000 people a year, and so that will continue.

Jeremy Kariuki: And as a charter company, NetJets, what does this mean for them and how often does a deal like this happen?

Molly McMillin: This is a huge magnitude, but NetJets traditionally orders aircraft with options for delivery. For example, in 2012, it ordered 150 Citation Latitudes with options for delivery beginning in 2016. And now 50 options were added in 2016, so that brought the total to about 200 Latitudes. There's about 25 or so left on the previous order, according to Jefferies. In May, just this past May, NetJets placed an order for up to 250 Embraer Praetor 500s. Now, some people thought that maybe the Praeters would replace the Citation Latitude, but clearly this is not the case.

For NetJets, the options give the company a lot of flexibility. They can turn them into firm orders based on customer demand in the future. It also gives them continuity and product offerings and product type, and in cockpit configurations for putting those in operation. Its Citation Latitude fleet, for example, has about 200 airplanes. And that's a lot. So, to be able to ensure that those aircraft are delivered in the same configuration over time so they can crew it the right way and maintain it the right way and give consistency to the customers, that's important to have an agreement in place like this, according to NetJets.

Jeremy Kariuki: And do you think we'll be hearing more about this deal, say, at NBAA-BACE in Las Vegas next month?

Molly McMillin: Well, I think we'll be hearing about it more over time. They've put into place other options and firm order agreements. So NetJets has been turning those options into firm orders over time. This isn't necessarily a new kind of deal, but the magnitude of it is certainly new.

Jeremy Kariuki: Well, that's all the time we have for today. Molly, thank you again for joining us.

Molly McMillin: Thank you. Thanks for having me.

Jeremy Kariuki: This episode was produced by Andrea Copley-Smith. Make sure to subscribe to the BCA Podcast wherever you listen. And if you're listening on Apple Podcast, please leave us a rating or review. Thank you for listening, and we'll see you next time.