(BRK.A), (BRK.B)
Berkshire Hathaway’s NetJets has had its planned fleet of supersonic business jets abruptly grounded as the jet supplier Aerion has gone out of business.
Competition in the fractional jet ownership business in the fledgling supersonic airspace had been heating up as NetJets and its main competitor FlexJets prepared to spend billions on the return of supersonic flight for the business jet market.
Supersonic flight would give these companies a substantial competitive advantage over commercial airlines in their competition for first class customers, especially for long distance overseas flights.
In 2015, FlexJet became the first fractional jet ownership company to place a firm order for the jets when they ordered twenty of Aerion’s AS2 aircraft, and NetJets followed suit with twenty orders of its own.
The proposed Aerion AS2 was to be a three-engine jet with a minimum projected range between 4,750 nautical miles and more than 5,000 nautical miles. Technological breakthroughs were supposed to reduce or eliminate the sonic booms that had limited the Concorde to routes that were over water.
Aerion claimed that at speeds around Mach 1.2 a “sonic boom would, essentially, dissipate before reaching the ground.”
The potential of the Supersonic Market
Supersonic business jets would fall into an interesting category of jets that if built will have a decided advantage over other private jets, but will be too expensive for most people to own outright. While the supersonic business jet market offers opportunity, it also comes at a high cost, with the price of each jet at over $100 million. That’s the perfect opening for fractional ownership companies to plot their growth.
Only the fractional ownership companies with the deepest pockets, such as NetJets, would able to compete in this market, giving them a clear advantage over smaller charter companies, and a major capability advantage over commercial airlines.
It will be interesting to see if NetJets or FlexJets put down purchase options with any of the other companies looking to get into the supersonic airspace, but for now, the dream of cutting flight times in more than half are grounded.
© 2021 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.