Warren Buffett’s NetJets Inc. will employ bigger, more luxurious jets to target increasing demand for its fractional-ownership program in fast-growing East European markets led by Russia, Turkey and Ukraine.
“Customers there want to see large cabins and the latest, brightest and newest aircraft,” NetJets Europe Sales Director Marine Eugene said in an interview, adding that the three countries are among the region’s few growth markets.
The NetJets Inc. unit of Buffett’s Berkshire Hathaway Inc. (BRK/B) placed $17.6 billion of orders for 670 jets between 2010 and 2012, including options, with the planes due to enter service over the next 10 years. Models including the Bombardier Inc. (BBD/B) Global 6000 and the Bombardier Challenger will provide a competitive edge in emerging markets for the European unit, in which the U.S company has a minority stake, Eugene said.
Private-jet usage collapsed worldwide following the 2008 credit crunch and recession as companies and high net worth individuals reined in spending. While north and south-European markets remain sluggish, demand has been steadily growing in less developed economies to the east.
“Ukraine and Turkey have been making initial purchases of aircraft non-stop for the past five years,” Eugene said. “They are building up a fleet.” Russia opened up earlier, with NetJets extending its main operating area to the country in 2004.
Under fractional-ownership plans, customers buy as little as a 1/16 share of an aircraft, depending on how often they want to use it, and have guaranteed access to flights anywhere in the world at 10 hours’ notice.
East European customers generally require bigger planes for longer trips than clients further west -- where the preference is for short hops between cities -- to attend meetings in the Middle East, Central Asia and Russia’s Far East, Eugene said.
Bombardier’s Global 6000 can fly for 13 hours, according to the Montreal-based company’s website, while the Challenger, due to enter the NetJets fleet starting next year, can travel 7,400 kilometers (4,600 miles), depending on the model.
NetJets last year introduced a membership card for Russia and Turkey with a 20 percent discount versus the company’s ordinary loyalty card, reflecting higher per-kilometer savings from long-distance flights. Ukraine was added in September.
“The card is a strategy to make sure that we keep our edge in areas in the market that are more dynamic than our core historical market,” Eugene said. “Our customer base in Russia has been growing non-stop since we introduced it.”
NetJets is also seeking to adapt to changing conditions in Britain, Germany and France, where demand is picking up as Europe emerges from recession. The Brussels-based European Business Aviation Association said in July that business-jet flights reached almost 62,000 in June, up 9 percent from May.
West European demand will be met using some of the 125 Embraer SA (EMBR3) Phenom 300 aircraft ordered by Columbus, Ohio-based NetJets Inc. from the Brazilian manufacturer in October 2010, when they had a list value of $1.05 billion. The twin-engine, short-range jets are due for delivery in Europe through 2014.
“Western European markets are very light-jet oriented, so this is a really good market offer for us,” Eugene said.
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