GRAHAM WARWICK / WASHINGTON DC
Aircraft orders decrease and customers desert programmes as market shrinks
The scale of the shrinkage in the fractional-ownership market is revealed in the latest quarterly filings by the parent companies of NetJets and Flexjet. NetJets, the market leader, saw a 53% decline in aircraft sales in the first quarter, compared with the same period last year, according to parent company Berkshire Hathaway.
Bombardier, meanwhile, has revealed the number of Flexjet customers had decreased to 687 as of 30 April, down from 714 on 31 January, the beginning of the Canadian company's 2003-4 fiscal year. "The increase in the number of customers exiting the programme is consistent with the overall market for fractional ownership," says Bombardier.
Despite the drop in customers, Flexjet's US fleet increased by one in the first quarter, to 111 aircraft. NetJets' latest figures shows its fleet decreased by one, to 512 aircraft, between March and May. The company added seven Cessna Citation Excels and six Citation Xs, but reduced its Dassault Falcon 2000 fleet by 10, to 37, and its Gulfstream IV-SP fleet by four, to 41 aircraft.
A 15.7% increase in NetJets flight operations revenue partially offset the drop in aircraft share sales. As a result, the decline in NetJets revenues was held to19.5% in the first quarter compared with a year ago, says Berkshire Hathaway. NetJets, which has cancelled an undisclosed number of aircraft deliveries since the beginning of the year, lost money in 2002. A small profit in the USA was more than offset by losses in Europe, says the parent company, which expects another loss this year, for NetJets and for the fractional industry as a whole.
Honeywell, which supplies business aircraft with avionics, engines and systems, says overall fractional share sales, which exceeded 1,600 in 2002, dropped by about 36% in the first quarter, to around 230. Honeywell Aerospace head Bob Johnson says the historical drop-out rate among share owners is around 10%.
Bucking the trend is Marquis Jet Partners, which subleases shares in NetJets aircraft in 25h increments. New York-based Marquis says first quarter revenues increased by more than 350%, and flight activity by more than 320%, over the same period last year. The company says it "continued to acquire new owners at an ever increasing rate in both the USA and Europe". Owner retention was "extremely strong with nearly 100% of those who purchased a Marquis Jet Card renewing or migrating to NetJets".
Raytheon, which is negotiating to take a majority stake in Flight Options, says the fractional joint venture lost $13 million in the first quarter. The company, which owns 49.9% of Flight Options, is meeting the fractional provider's financing needs while it negotiates a new investment and restructuring deal. Raytheon subsidiary Raytheon Aircraft Services has reached an agreement with Flight Options to provide all maintenance for the fractional provider. Cleveland, Ohio-based Flight Options operates 200 aircraft, of which around 75% are Raytheon types.Source: Flight International
