(BRK.A), (BRK.B)
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.