Buffett’s NetJets Says China Market May Surpass U.S., EuropeBenjamin Haas and Stephen Engle
NetJets, the aviation business of Warren Buffett’s Berkshire Hathaway Inc., said the Chinese market could overtake its businesses in the U.S. and Europe as the company prepares to start mainland operations this year.
The fractional-jet company, whose clients take a stake in a plane in exchange for flight hours, expects to clear final regulatory hurdles in China in June or July, Chief Executive Officer Jordan Hansell said in an interview yesterday at the Bo’ao Forum in Hainan province. NetJets will start managing private planes before introducing the fractional model, he said.
NetJets expects aircraft management “to be a very large market over time and it could be as large as we have in the United States or even larger in a relatively short period of time,” Hansell said. “Ultimately, fractional ownership may be the same and surpass the U.S.”
Private jet ownership in China is expected to grow more than sevenfold by 2032 from 2012 levels, according to forecasts from Bombardier, a Canadian builder of trains and small jets. The country will account for roughly 9 percent of the worldwide business jet fleet in 2032, up from less than 2 percent in 2012.
Hansell is helping to turn around a business that Buffett once called his “No. 1 worry.” NetJets lost money for the Omaha, Nebraska-based firm from its purchase in 1998 through 2009 and would have gone broke without the parent’s support, Berkshire’s billionaire chairman has written in his annual letters to shareholders. The unit had more jets than it needed, Berkshire said in a 2010 filing.
The Chinese government will need to liberalize its airspace and build more infrastructure for NetJets’ mainland business to surpass the U.S. market, Hansell said. China’s military controls all airspace in the country and short-notice flights are difficult.
President Xi Jinping’s austerity campaign can only help NetJets’ business in the country, he said. Partial ownership can increase efficiency, compared with owning a plane outright, he said.