NetJets will buy $9.6 billion in new planes from Cessna, BombardierBy Molly McMillin
The Wichita Eagle
NetJets has signed what it says is the largest private aviation order in history: up to 425 new planes from Cessna Aircraft and Bombardier valued at $9.6 billion in list prices.
NetJets, which provides fractional ownership of aircraft, said Monday it will buy up to 150 Wichita-built Cessna Citation Latitudes, including 25 firm orders and options for 125 more. The Latitude order is valued at $2.3 billion at list prices.
Deliveries are to begin in 2016 and stretch over 10 years.
NetJets also will buy up to 275 Bombardier aircraft, including 100 firm orders for Challenger 300 and 605 series airplanes, with options for 175 more. The planes, at list prices, are valued at $7.3 billion. Deliveries are to begin in 2014.
As a volume customer, NetJets traditionally receives discount pricing from manufacturers.
The orders reflect a long-term confidence in the economy, NetJets chairman and CEO Jordan Hansell said in a conference call with reporters late Monday. The planes will go into the company’s U.S. and European fleets.
“It’s clear from the terms of these deals, (that) we take a very large view of what we think the general economy and general aviation will look like,” Hansell said. “We feel confident and comfortable that the U.S. economy and the European economy will ultimately come back to a much stronger position. We feel it’s prudent to take a stand now and make a decision now to make sure we’re well positioned (for the future.)”
Depending on the economy at the time of delivery, the planes will be used to either expand or replace NetJets’ fleet, Hansell said.
Cessna’s order appears to be the company’s largest order from one buyer since the recession sent the business jet market into a tailspin, hurting Wichita business jet manufacturers.
“We are very excited to enhance our long-standing relationship with NetJets by producing the Citation Latitude for them and their customers,” Cessna president and CEO Scott Ernest said in a statement.
Cessna announced the Citation Latitude in October at the National Business Aviation Association’s annual convention and exhibition. The jet is positioned between Cessna’s Citation XLS+ and the Citation Sovereign and holds a crew of two and up to eight passengers. Its retail price is $14.9 million.
NetJets, based in Columbus, Ohio, allows customers to buy a specific percentage of an aircraft and use a certain number of flight hours a year. It also lets customers, through its Marquis jet card program, to buy hours of flight time. NetJets provides the management, ground support and flight operation services.
The Bombardier 300 ordered by NetJets is not the same aircraft currently being offered by the company, Hansell said. It will have unique features in its cabin, propulsion system and in other areas.
“We purchased a derivative that will be, in many respects, specific to us,” he said, although it is not an exclusive arrangement with NetJets.
The addition of the Cessna and Bombardier airplanes, along with recently ordered Phenoms from Embraer and Bombardier Global aircraft, launches a new NetJets Signature Series aircraft that’s part of NetJets’ 10-year business plan, the company said. The Signature Series planes are the first aircraft NetJets helped design from start to finish, the company said.
“These aircraft are bigger, faster, quieter and offer longer range than similar aircraft of the previous generation,” it said in a statement.
What customers want
NetJets assembled large teams to analyze potential purchases of aircraft.
Teams were made up of maintenance, technical and flight personnel, lawyers, analysts and others who conducted a multi-pronged analysis of fuel efficiency, performance, interior cabin configurations and the flexibility of the manufacturers to work with the company, Hansell said. It also shared data from its customers with the planemakers, he said.
The company knows what its customers look for in terms of seating arrangements, sound systems, air quality, humidity, storage specifications and other items, Hansell said.
“We had an unparalleled database of owner preferences and flying habits,” he said.
NetJets was founded in 1986 and is owned by Warren Buffett’s Berkshire Hathaway, which bought the company in 1998.
For years, NetJets has typically been Wichita’s biggest buyer of business jets, buying billions of dollars of Cessna and Hawker Beechcraft aircraft. During the downturn, however, NetJets canceled large orders with Cessna, Hawker Beechcraft, Gulfstream and Dassault.
NetJets currently owns and operates more than 725 aircraft, including more than 250 Citations. That includes the Citation Encore, Citation XLS+, Citation Sovereign and Citation X.
Besides Cessna and Hawker Beechcraft planes, NetJets also operates Gulfstream and Dassault aircraft and, in 2013, will add Embraer Phenom 300 jets.
Last year, NetJets’ earnings increased 10 percent, according to Berkshire Hathaway’s 2011 annual report. Sales have increased year-over-year since 2009, Hansell said.
Since 2008, the company has reduced the number of aircraft in its fleet by about 20 percent and lowered its operating cost structure to better match customer demand, it said.
The Citation Latitude will be equipped with Garmin G5000 avionics and updated cabin technology, the company said. It will have a range of about 2,300 nautical miles, have a maximum cruise speed of 506 mph, operate at a maximum altitude of 45,000 feet and climb to 43,000 feet in 26 minutes, it said.
The first flight of a Latitude prototype is expected in mid-2014 with federal certification and entry into service in 2015.Reach Molly McMillin at 316-269-6708 or email@example.com.
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