Kate Sarsfield/LAS VEGAS
If one was asked to name a single individual who has changed the face of business aviation in recent years, Richard Santulli, pioneer of fractional ownership, would be at the top of the list. Santulli's concept of fractional ownership has revolutionised the market to such an extent that it now accounts for over 20% of total business aircraft sales worldwide.
"It was a struggle to begin with," says Santulli, chief executive of Executive Jet, which operates the NetJets programme. "When I came up with this concept in 1986, I knew I was on winner, but my task was to convince the traditional manufacturers and flight departments, who were very hostile."
Santulli, a former mathematician, reckoned that although owning an aircraft was beneficial to companies and individuals, the cost was often prohibitive. He believed that, if you divided an aircraft into fractions, say an eighth, quarter, or a half share, this would bring aircraft ownership within the reach of many more people.
"All the odds were against us. For the first five years we were hated by a lot of people. Cessna was the only manufacturer who believed that what we were doing made sense," he says. The remaining manufacturers, he maintains, were afraid to sell to Executive Jet, because of the influence of company flight departments, which were often their main source of income.
Santulli believes such concerns are unfounded. "Flight departments are not going to become obsolete. We are in the business of supplementing them and not closing them down - we are the flight departments emergency service, when their assets get tied up, we can respond within four hours."
He says that, in 1995, when he announced his first major order with Gulfstream, around 90% of GIVs were sold to existing Gulfstream customers or owners of large aircraft. "If you keep on trading aircraft between the same people, what's the big deal - there will never be significant growth. We knew we were going to introduce people into the industry in a way manufacturers could not."
Santulli admits he lost "millions of dollars" in the early stages, purchasing not only fractionally owned aircraft but also building his core fleet for use as back-up. "Our whole thought process was intelligent and it made sense, we knew who we were going after and we have proved correct," he says. Around 80% of NetJets customers have never owned an aircraft before.
The hard work has finally paid of. In July he sold Netjets to investor Warren Buffet for nearly $1 billion and still remains in charge of the company. Now with an expanding orderbook of 340 aircraft, valued at $7.3 billion, the industry must be asking itself why it did not support him earlier.
Fractional ownership is now driving the corporate jet industry and world leader NetJets accounts for the bulk of the growth. Executive Jet also lays claim to be the largest employer of pilots in the sector, with over 900, with numbers expected to double within three years.
Santulli is unconvinced that a recession will have an impact on his company. "Our growth is so large now that I wouldn't mind a six- month slowdown, so I can take a deep breath." His main concern is that the infrastructure will not be sufficient to sustain the projected growth, citing a shortage of skilled labour and the increasingly limited capacity at manufacturing, maintenance and completion centres. "It is fine now but what will it be like in five years time? We need 24h service, seven days a week so we can get our assets returned and, if the manufacturers can't provide it, we will create it ourselves," he warns.
Santulli plans to play a more active role in the fledgling NetJets Europe enterprise, which he believes is being hindered by airport access restrictions at the major hubs and a poor aircraft support network. "The utilisation of aircraft in Europe is not as efficient and we cannot rely on the charter operators to supply aircraft when we need them, that is why we are putting lots of Dassault Falcons and Raytheon Hawkers in there. I can't bet on Europe but I think in five years we will have about 50 aircraft there."
He also believes that NetJets will continue to lead the market across the globe and plans to launch programmes in the Far East and South America. "I don't think anyone will catch us up. I'd be upset if they did."
Santulli concedes that his determination to beat the odds and force through his ideas is down to his obstinacy. "I believed that this concept was right all along and I stuck with it. My only regret is that I didn't succeed earlier."
Source: Flight International
