In a letter shared with owners, employees and prospects, leading fractional operator NetJets set out the steps it has taken to adjust for a covid-19 world. Parts of its business have seen some layoffs and its core fractional business has reduced the number of new planes it plans to add this year.
The letter, shared with SherpaReport, says “While we remain ready to serve and are still conducting hundreds of flights every week, our overall demand has been down significantly since mid-March.” This drop in demand has affected all aspects of aviation.
The letter goes on to say, “With flight volumes so depressed, we have taken necessary steps to adapt, with some portions of our business more adversely affected than others.” The key changes that the company has made include the following.
Reduced Aircraft Orders
In recent years, NetJets has been adding about 60 brand new aircraft a year to their global fleet, and had plans to add a similar number this year. These deliveries have included the mid-size Citation Latitude, which they first took delivery of in 2016 and by earlier this year had nearly 120 in their fleet. But, with the change in the market they say “We have restructured, deferred, or canceled many of the aircraft deliveries planned for the remainder of 2020.” Then go on to add, “because of the new market realities, we have reduced the total number of deliveries planned for this year to about 25 factory-new aircraft.”
Limited Changes in Core US Business
The core fractional and jet card business in the United States has seen a relatively limited number of changes. The letter says “In our NetJets U.S. business, beyond the requisite work-from-home programs, we have offered voluntary unpaid leave of absence programs to both crewmembers and corporate office staff. Participants will retain their company-paid health care benefits for the duration of their leave. Aside from these voluntary measures, no furloughs or workforce reductions have taken place within our core NetJets U.S. business.”
Reductions in Europe and EJM
The news from the smaller European operations is somewhat different, with headcount reductions taking place. Specifically, “at our NetJets Europe (NJE) business based in Portugal, we made the extremely difficult decision to reduce our overall workforce there by approximately 25%. This move marks the need to align NJE’s business structure to the current market.”
There’s similar news from the aircraft management arm, which has also seen headcount reductions. With the letters saying “Executive Jet Management (EJM) based in Cincinnati, Ohio, experienced a similarly sized reduction in its operational support staff yesterday with roughly 25% of its employees furloughed to correspond with demand forecasts.”
The letter does emphasize the financial strength of the company, and in the past NetJets has highlighted that it is owned by Warren Buffetts, Berkshire Hathaway, to reemphasize this relative strength. The letter puts it this way “I am proud to say that NetJets did not apply for bailout funds and aside from the very difficult decisions made in our NJE and EJM subsidiaries, there have been no other furloughs required. Applying what we learned during the financial crisis of 2008, we have spent the past several years paying off our debt and reinvesting in our business. Our stated goal was to build a business for all economic conditions.”
NetJets has also formed a new partnership with Cellex, which was the first company to be granted an FDA emergency authorization for its rapid antibody covid-19 test. Four long range NetJets Global 6000s were sent to China, to collect half a million Cellex covid-19 antibody tests. The tests have already been used on health care workers and first responders in Florida, Ohio, and North Carolina.
The partnership also means “NetJets employees will have the opportunity to be tested for covid-19 antibodies in the coming weeks.” In addition to this, NetJets and their pilots’ union, have partnered with Quest Diagnostics to make covid-19 virus testing available to company employees at no cost. The company says “We are committed to testing 100% of our crewmembers initially and offering ongoing testing to anyone who travels to high-risk locations, has been exposed to covid-19, or becomes symptomatic.”