Category Archives: NetJets

NetJets Adds Wide-Cabin Jets

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NetJet flyers have more room to spread-out as NetJets adds more wide-cabin jets to its fleet with the purchase of seven Bombardier Challenger 650 business jets.

The first of the Challenger 650s was put into service in mid-December.

Bombardier Challenger 650 boasts class-leading width, and has a maximum range of 4,000 NM, with a maximum altitude of 4,000 feet.

The Challenger 650 has a cabin width centerline of 7 feet 2 inches, a cabin width floorline of 5 feet 1 inch, and a cabin height of 6 feet 1 inch.

Bombardier also claims that the jet has the lowest-in-class direct operating costs.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Commentary: A Christmas Wish List for Under Warren Buffett’s Tree

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Here’s a Christmas wish list for presents under Warren Buffett’s tree. The items are big, so we’ll fit them under Charlie Munger’s tree as well.

1. Precision Castparts: There’s nothing like getting the present you bought for yourself. The pending acquisition the aerospace manufacturer looks like the gift that will keep on giving.  Demand for new airplanes will double over the next 15 years, as aging fleets are retired and millions more people start to fly regularly in India and China.

2. Duracell: Because everyone likes to get cash for Christmas! With the Duracell acquisition set to close in February 2016, Berkshire will gain not only the leading alkaline battery manufacturer, but will also get a company recapitalized by P&G with $1.7 billion in cash, and will get huge tax savings as it trades in its appreciated P&G stock for the battery maker.

3. More German Companies: Warren Buffett’s admiration for the German economy was on full display at the Berkshire Hathaway annual meeting in May 2015. This past February, Berkshire Hathaway struck a deal to acquire Devlet Louis Motorradvertriebs, a mail-order and retail chain selling motorbike clothing and accessories. The move, according to Buffett, was just the first small acquisition in a country with a strong economy and work ethic. And, with a rising dollar and a shaky euro, will more German companies fit under Berkshire’s tree?

4. Lots of Natural Gas: As the world dumps coal and moves to cheaper and cleaner forms of energy, Berkshire’s on the verge of striking it rich in Australia’s gas fields. Natural gas prices may be cratering now, but it never hurts to have a majority share of four trillion cubic feet of gas-in-place (yes, trillion) in Australia’s Whicher Range and Wonnerup gas fields. A new test well hopefully will bring good news in the new year.

5. More Auto Dealers: When Berkshire Hathaway jumped into the auto retailing business in March 2015, with its acquisition of the Van Tuyl Group, it added a whole new line of business to the mega-conglomerate. The Van Tuyl Group was the largest privately owned auto dealership group in the U.S., and Buffett promised that this was just the start of building a major auto-retailing empire. So, will Herb Chambers Companies, a privately-held, Boston-based dealership group with 55 total dealerships, be the perfect fit for Berkshire Hathaway Automotive? Its owner looks ready to sell. Time to wrap this one up and put a bow on it.

6. Happy Pilots at NetJets: Forget your crazy uncle, there’s nothing like having a happy family at Christmas. This holiday, NetJets’ pilots and its flight attendants will be celebrating their new contracts that bring substantial raises. Hopefully, they’ll use it to buy some of Berkshire’s fine products. How about some jewelry from Borsheims? It’s been a good year. Go for it!

7. More Solar & Wind! Berkshire’s quickly becoming the leading energy producer and distributor of solar and wind energy. This year saw major wind farm projects, including a new wind farm site in Adams County, Iowa, which will produce 162 megawatts of additional wind generation capacity in Iowa. Berkshire’s aggressive expansion of it solar power farms saw its Topaz Solar Farm in San Luis Obispo County, California, become one of the largest photovoltaic solar farms in the world. And, there’s plenty of room under the tree for more such projects, which not only bring cheap energy, but also lower environmental costs as they are emissions free. With the cost of solar energy dropping fast, Berkshire’s been signing amazing deals that are a Christmas present now and for decades to come. In Nevada, it has contracted to buy electricity from First Solar’s soon to be built Playa Solar 2 at the astoundingly low rate of only 3.87 cents a kilowatt-hour, and the deal is a fixed rate contract for twenty years.

8. More Deals with 3G Capital: Because everyone likes surprises. 3G’s aggressive acquisition strategy has been the perfect partner for Berkshire’s cash. 3G brings not only the aggressive cost-cutting (aggressive is an understatement) that is bringing legacy companies such as Kraft-Heinz into the 21st century, but also gives excellent financing and equity opportunities. 3G’s merger of Burger King with Tim Hortons brought Berkshire fat interest payments and made Berkshire a minority owner of the newly formed Restaurant Brands International. Surely, there are more deals to be done.

Hard to fit this all under the Christmas tree? Berkshire’s a big company. There’s room for all this and more.

Merry Christmas everybody!

–David Mazor

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

NetJets Pilots Get Their Long-Awaited Raises

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It’s going to be a merry Christmas for NetJets’ pilots!

The approximately 2,700 pilots that fly for Berkshire Hathaway’s fractional jet ownership company have agreed to raises that will bring them $575 million spread over five years.

The new deal maintains company-funded medical insurance, offers enhanced scheduling options, expands scope protections and seniority rights, pays out a signing bonus and increases wages an average of 28 percent.

According to the certified election results, 96 percent of the pilot group participated in the referendum with 75.43 percent casting a vote in favor of ratification.

The pilots, who are all members of the NetJets Association of Shared Aircraft Pilots (NJASAP), will split a one-time bonus of $70 million.

The raises mean that a captain with ten-years-experience will earn $143,105. The salary represents a 20-percent increase over previous salary levels.

NetJets is the world-leader fractional jet ownership, with 60-percent of the market, but the move is unlikely to leave it at a competitive disadvantage with its smaller competitors.

In mid-December, Flexjet and Flight Options pilots voted in favor of joining NJASAP, and the salaries negotiated with NetJets will surely be the basis for NJASAP’s negotiations with other fractional jet companies.

The new NetJets pilots’ agreement came after a contentious labor dispute that led to NetJets’ pilots picketing Berkshire’s annual meeting in Omaha, Nebraska, and in September, the pilots began picketing at a number of airports.

Change in Leadership Led to Breakthrough

On June 1, 2015, Berkshire Hathaway, the owner of NetJets, dismissed NetJets CEO and chairman Jordan Hansell, replacing him with Adam Johnson, who had spent 22 years at NetJets. The change led to a new contract with its flight attendants in October, and then an agreement with the pilots in November.

Berkshire Hathaway purchased NetJets, the leader in fractional jet ownership, in 1998 for $725 million.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

NetJets Paying Cancellation Fees as Profits Grounded

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No one likes cancellation fees when they fly, and for Berkshire Hathaway’s NetJets Inc. it’s when they don’t fly, or more specifically when they don’t buy that they incur fees.

NetJets is ponying up cancellation fees as it cuts orders for aircraft purchases and grapples with slumping earnings even as revenues grow.

Columbus, Ohio-based NetJets has run into turbulence this past quarter with its earnings down a whopping 37-percent. Earnings for the first nine months of the year were down a less dramatic but still meaningful 7-percent.

“In 2015, NetJets incurred increased non-fuel flight operation costs and increased general and administrative expenses, including fees to cancel certain aircraft purchases,” Berkshire Hathaway said in its most recent quarterly financial report.

Total revenues were up 5-percent but the company reported that the revenue growth was “partially offset by lower flight operations revenues, which were primarily due to lower fuel cost recoveries.”

Back in 2012, NetJets announced the largest private jet purchase in history, with a total of 425 aircraft scheduled to be added to its worldwide fleet. At the time, it valued the total purchase from Bombardier and Cessna at $9.6 billion.

Now, it looks like some of those orders will go unfilled.

Berkshire Hathaway purchased NetJets, the leader in fractional jet ownership, in 1998 for $725 million.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

NetJets Reaches Tentative Agreement with Pilots

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Berkshire Hathaway’s NetJets is on the verge of settling its labor dispute with its pilots union, just a week after reaching agreement with its flight attendants.

The pilots have been working without a contract since the previous agreement expired in 2013.

NetJets Aviation and the NetJets Association of Shared Aircraft Pilots (NJASAP) have reached an agreement in principle on a new collective bargaining agreement that would end the union’s picketing at seven airports.

The NJASAP Executive Board and Negotiators confirmed that the proposed agreement has enhancements consistent with their goals of “protecting, repairing and improving the previous agreement.”

NetJets and NJASAP have been engaged in contract negotiations since June 2013, and, in early May 2015, began bargaining with the assistance of a National Mediation Board-appointed mediator.

The union released this statement:

“Getting to this point has required a massive effort from top to bottom,” NJASAP President Pedro Leroux said. “We could not have succeeded without the tremendous support of our members and their families: I am extremely proud of this outstanding group of professional pilots.” The Union president added, “I would also like to thank the National Mediation Board, the new NetJets senior management and their negotiators for their commitment to the bargaining process.”

They also added:

“In our highly competitive segment of aviation, major improvements to collective bargaining agreements require that everyone do their part to ensure the highest levels of safety, customer service and reliability,” Leroux said. “The NJASAP pilots have led the industry in these categories, and, going forward, we will redouble our efforts to ensure NetJets retains its industry-leading position.”

It will be late November before the pilots actually vote on the new agreement.

Change in Leadership Brings Breakthrough

On June 1, 2015, Berkshire Hathaway, the owner of NetJets, dismissed NetJets CEO and chairman Jordan Hansell, replacing him with Adam Johnson, who had spent 22 years at NetJets. At the time, there was hope of a breakthrough with NJASAP, the labor union representing the approximately 2,700 pilots employed by NetJets.

Berkshire Hathaway purchased NetJets, the leader in fractional jet ownership, in 1998 for $725 million.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

NetJets & Flight Attendants Reach Tentative Agreement

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NetJets’ ongoing labor issues took a big step forward as the International Brotherhood of Teamsters Local 284 and NetJets Aviation reached a tentative agreement on a new contract for the 278 flight attendants represented by the union.

The agreement is being hailed as containing “substantial” pay increases and is being called “mutually beneficial.” The union said the terms include:

• A $2.8 million ratification bonus that will equal approximately $80 per month of service for all flight attendants.
• Substantial pay increases for all flight attendants at all seniority levels.
• New 18-year pay scales, increasing from prior 10-year scales.
• The ability to use sick days as personal days.
• New schedule choices.
• Increased flight attendant basing opportunities.

Work on a final agreement will begin during the week of October 12.

Change in Leadership Brings Progress

On June 1, 2015, Berkshire Hathaway, the owner of NetJets, dismissed NetJets CEO and chairman Jordan Hansell, replacing him with Adam Johnson, who had spent 22 years at NetJets. At the time, there was hope of a breakthrough with NJASAP, the labor union representing the approximately 2,700 pilots employed by NetJets.

While some progress was made during a 90-day summer ceasefire that included an expedited bargaining schedule with the intent of reaching a tentative agreement, the two sides were still at loggerheads over wages, retirement and health care benefits. NJASAP resumed its picketing, noting that the union and management were still far apart.

In September, 800 pilots and their family members picketed at seven picket sites across the country.

Now, with the breakthrough agreement with the flight attendants’ union, there is at least a glimmer of hope that NetJets might settle its contract dispute with its pilots. NetJets and NJASAP have been engaged in contract negotiations since June 2013, and, in early May 2015, began bargaining with the assistance of a National Mediation Board-appointed mediator.

Berkshire Hathaway purchased NetJets, the leader in fractional jet ownership, in 1998 for $725 million.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Pilots’ Union Set to Resume Picket of NetJets

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Sometimes a familiar face is not enough to bridge a labor contract dispute.

The NetJets Association of Shared Aircraft Pilots (NJASAP) has set September 10 as the date to resume picketing NetJets at seven airports. The resumption of picketing reflects the union’s frustration with its lack of progress in getting a new contract.

NetJets pilots have been working without a contract since the prior agreement expired in 2013.

A Familiar Face Returns

On June 1, Berkshire Hathaway, the owner of NetJets, fired NetJets’s chief executive and chairman Jordan Hansell. Hansell was replaced with Adam Johnson, who had spent 22 years at NetJets.

At the time, NJASAP was positive in the change in NetJets’s leadership.

“Newly appointed CEO Adam Johnson and COO Bill Noe bring much needed experience in both operational and labor relations to their respective positions. Union Leadership looks forward to engaging the new team: We hope they share our goal of rebuilding a once progressive labor management relationship. Similarly, Union Negotiators remain ready and willing to work with senior management to bring contract negotiations to a successful conclusion on behalf of our pilots.”

Unfortunately, after a 90-day summer ceasefire, the union is ready to resume its picketing, noting that the union and management are still far apart.

Johnson has pointed to the “remarkable” progress the two parties have made, but notes, “due to the parties’ views about the economics of this business — and thus how much additional cost we can take on over the next decade — as well as different expectations concerning the demand for the services we provide.”

NJASAP is seeking a 35% pay increase over three to five years. Currently, its captains with 10 years of experience earn $131,179 a year.

Words of Wisdom from Warren

“It’s human nature to sometimes have differences about how people get paid,” Berkshire chairman Warren Buffett said, when questioned about the dispute at the 2015 Berkshire Hathaway annual meeting.

Unfortunately, those differences don’t look any closer to being resolved.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

NetJets Drama Could Lead to Labor Breakthrough

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With the twists and turns of a political thriller, changes in NetJets’s management may just lead to a breakthrough in its labor dispute between its pilots and management.

The ongoing dispute has been a familiar sight to anyone attending Berkshire’s annual meeting the past few years, as hundreds of pilots from the NetJets Association of Shared Aircraft Pilots Union have picketed in “informational protests” that laid out a host of grievances, including working without a contract for two years.

“It’s human nature to sometimes have differences about how people get paid,” Berkshire chairman Warren Buffett said when questioned about the dispute at the annual meeting.

Pedro Leroux, president of the pilots’ union, has said that NetJets has demanded that pilots and other unionized employees concede to wage and health care concessions despite the luxury jet fractional ownership business having revived from near bankruptcy levels during the 2009 recession.

Berkshire credited its 9.5% increase in 2014 revenue in its service businesses to NetJets and aviation training company FlightSafety International.

Leroux also noted that the pilots had lost trust in NetJets’s chief executive and chairman, Jordan Hansell.

Now, in an odd twist, Hansell is out the door after four years at the helm, and Adam Johnson has been appointed CEO and chairman.

Letters to Buffett

After almost 22 years at NetJets, where Johnson had risen to number 2 in the management hierarchy, Adam Johnson left the company on May 1, ostensibly to take a job outside of the aviation industry. According to reports, it was clear that Johnson and Bill Noe, who had also resigned, were dissatisfied with Hansell’s leadership, and The New York Post wrote that Johnson had sent a letter to Berkshire chairman Warren Buffett questioning “the direction of the company.” They also reported that Johnson had sent a similar letter back in 2009 that lead to the ouster of NetJets founder Richard Santulli.

With Johnson back as the new chairman, Noe has also returned and moved up the ladder as president and chief operating officer.

Now the pressure is on Johnson and Noe to resolve a dispute that Hansell had no luck with. He apparently had avoided meeting with Leroux over the two years since the contract had expired, something that Johnson and Noe promptly remedied after just a few days back on the job.

No word yet if the talks were fruitful, but its clearly time that NetJets resolves the conflict, as a shortage of pilots has given the pilots union increased leverage.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.