NetJets Inc., the business-jet operator owned by Warren Buffett’s Berkshire Hathaway Inc., said it placed a record order for as many as 120 Bombardier Inc. planes in anticipation of a rebound in luxury travel.
The agreement, worth more than $6.7 billion at list prices, comprises 50 firm orders and 70 options, according to a statement carried today by Business Wire. It didn’t say how much Columbus, Ohio-based NetJets would pay for the aircraft, which will be delivered starting in the fourth quarter of 2012.
NetJets, which also ordered 125 Embraer SA jets in October, said it expects the planes’ arrival to help meet increasing demand following what will likely be a “difficult” 2011. The unit made a profit last year after David Sokol, named by Buffett to lead a turnaround in 2009, fired staff and wrote down plane values.
“NetJets is probably positioning themselves for a pickup in demand next year,” said Julius Yeo, a Singapore-based aerospace consultant at Frost & Sullivan Inc. “The business-jet market in the U.S. still hasn’t really picked up yet.”
The firm orders include 30 of Montreal-based Bombardier’s Global 5000 Vision and Global Express XRS Vision aircraft, which will be delivered starting next year. The deal also includes 20 firm orders for Bombardier’s new Global 7000 and Global 8000 jets, which will be handed over starting in 2017.
“Although we anticipate 2011 to be another difficult year, when Bombardier begins to make deliveries of these aircraft, we will be ready to satisfy the market’s demand,” Sokol said in the statement.
Class A shares of Berkshire Hathaway, which also has units running railroads, offering insurance and making consumer goods, fell 2.5 percent to $128,050 in New York trading yesterday. They’ve gained 6.3 percent this year. Bombardier has surged 23 percent this year in Toronto.
NetJets has a fleet of more than 800 business jets, including ones made by Dassault Aviation SA, Textron Inc.’s Cessna Aircraft Co. and General Dynamics Co.’s Gulfstream Aerospace Corp., according to the statement. The company operates a fractional-ownership model that lets customers buy flight-hours across a fleet of jets.
Buffett installed Sokol to run the unit, which the billionaire called Berkshire’s “major problem” for 2009, after reductions in corporate-travel spending amid the global recession damped demand for business-jet flights.
The unit made a $207 million pretax profit in 2010, helped by a 7 percent increase in sales, compared with a loss of $711 million a year earlier, according to Berkshire’s 2010 annual report. It made an aggregate pretax loss of $157 million in the 11 years through 2009, according to the report.
The unit had 6,238 employees, about 1,000 less than a year earlier, according to the report. Berkshire bought NetJets in 1998, according to the jet operator’s website.Share Investor LinksDownload the 2010 Berkshire Hathaway Annual Report
Download the 1977 - 2010 Warren Buffett Letter's to Berkshire Hathaway Shareholders
|The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett |
Buy new: $24.85 / Used from: $19.17
Usually ships in 24 hours
|Buffett's Bites: The Essential Investor's Guide to Warren Buffett's Shareholder Letters by L.J. Rittenhouse|
Buy new: $13.57 / Used from: $7.95
Usually ships in 24 ho