NetJets has announced a significant purchase agreement with Embraer that will add up to 125 Platinum Edition Phenom 300s to the NetJets fleet. According to a press release issued this afternoon, the agreement with Embraer is the first step in the execution of a ten year fleet plan intended to satisfy the demands of NetJets customers. The company indicates that today’s purchase announcement is the first of several to come in the next few years and that future plans will include midsize and larger fleets in addition to orders already on the books to acquire $2.95 billion worth of aircraft.
The agreement between NetJets and Embraer comes at a time when the business jet market is still under significant pressure. According to a survey published on Sunday and discussed in today’s Financial Times, Honeywell is forecasting a softer than anticipated recovery in 2011 which should be followed by more robust conditions in 2012. Honeywell believes that the peak of the next cycle could be even higher than the prior peak in 2008, but this may not occur until late in the decade. Honeywell manufactures a broad array of components used in the assembly of corporate jets.
NetJets Chairman and CEO David Sokol made the following comments regarding the agreement with Embraer:
According to Chairman and Chief Executive Officer David L. Sokol, “No one is more confident about the future of private aviation than NetJets. We continue to be guided by our vision to strengthen our leadership position by delivering extraordinary safety and service to our Owners. We are pleased to be in a strong position in our industry and proud to be announcing this order for an exceptional aircraft that our Owners will value for years to come.”
Owner research and a comprehensive view of flight patterns and service requirements contributed to the decision to select the Phenom 300. In addition, an extensive analysis was conducted at NetJets by multiple, cross-disciplinary teams representing flight crews, maintenance, flight operations, safety, sales, finance and owner services. “This is a high performance aircraft that is ideally suited to our Owners’ needs for reliability, range, interior comfort and operating efficiency,” said David Sokol. “It will be an excellent fit in an already diverse fleet that is unmatched in private aviation.”
More information regarding NetJets recent business performance will be available when Berkshire Hathaway releases its third quarter report in early November. NetJets has been posting improving results in 2010 after suffering a series of losses during the recession. However, David Sokol’s management of the company has been called into question by former employees of the company as well as some outside observers who allege that the NetJets brand is being irreparably harmed by short sighted cost cutting.
The final verdict on Mr. Sokol’s management of NetJets is not yet in and may have to wait at least a few years so investors can measure how the company performs through at least a full economic cycle. However, at this point, there is no objective evidence to suggest that Mr. Sokol’s management has damaged the NetJets brand as most of the (mainly anonymous) former employees continue to allege.
Disclosure: The author of this article owns shares of Berkshire Hathaway.