Chairman expects a profitable year, with stable staffing, perhaps growth through acquisition
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NetJets’ David Sokol
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NetJets’ David Sokol
If use of private jets is an indicator of the economy’s health, things are at least stabilizing.
NetJets Chairman and CEO David Sokol predicted last week that the Columbus-based company will be profitable this year and that staffing levels will remain stable.
Sokol, who took the reins of the company in August, said he feels “more optimistic” about the business than he did last fall, when the Berkshire Hathaway unit was cutting staff and selling planes in a bid to turn itself around.
With 482 pilot furloughs taking effect last week and the rest of the company work force down 5 percent, or about 350 employees, from when he arrived, Sokol said he doesn’t anticipate any more layoffs. That’s “barring any major shifts in the global economy,” he added.
NetJets will turn a modest profit this year, he said, after a 2009 loss of about $720 million. The majority of that loss was in write-downs on aircraft values, as a glut of planes for sale amid the recession brought prices crashing down.
“On an operating basis, the last two months of 2009 were profitable,” he said.
“Sales increased somewhat, and repurchases declined every month in 2009,” Sokol said. The company sells fractional ownership of private jets but sometimes buys back those timesharelike ownership stakes.
Data from Aviation Research Group/U.S. shows that the private-jet industry is stabilizing. Fractional aircraft use increased steadily in late 2009 with a 21 percent increase in November over the same month in 2008.
Despite encouraging signs of recovery, Sokol downplays the immediate bump in business that some observers have predicted would occur as recent terror-related incidents prompted tighter security measures for commercial air travel.
“These types of incidents tend to put a negative view on travel in general,” he said.
But that’s in the short term.
Over the long term, what “drives business to us is the security factor, not the hassle factor. Businesses and high-net-worth individuals value the security of being on private aircraft.”
Growth in other ways remains somewhat of a possibility for NetJets.
Sokol said he’s been approached by a number of smaller competitors interested in selling their businesses to NetJets. He said there’s only “one potential deal” that’s being worked on, and it could occur in the coming weeks. He said that deal would involve NetJets taking on the customers of the other company.
Other deals would have involved taking on more debt, something that’s not in NetJets’ plans.
In fact, the company has been taking steps, including canceling plane orders and selling planes, to reduce its own debt, which was $1.8 billion as of the end of July. That resulted in a $400 million reduction from August through December last year, Sokol said, and he’s looking to reduce debt by $300 million this year, which would achieve a debt goal of $1.1 billion by year’s end.
In all, Sokol said, he’s pleased with the progress in the business since he was dispatched by Berkshire owner Warren Buffett to take over NetJets last summer.
“I feel really good about NetJets. I think we’re on a really solid foundation,” Sokol said. “I’m very happy with Columbus and the fact that we consolidated operations and brought the headquarters here.”
The company always has had its operational base in Columbus but had maintained its administrative headquarters in New Jersey until last fall.
A number of smaller competitors have approached NetJets about selling their businesses, he said.
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