The executive jet fractional ownership programme may have hit turbulence in North America and Europe, but NetJets Middle East is investing in a region-wide promotional strategy to ensure the concept takes off successfully here.
To coincide with the delivery of the new Falcon 2000LX aircraft – the first to be operated commercially in the Middle East – the firm will make renewed efforts to target the region's high net-worth individuals, private companies and multinationals.
"The fractional ownership programme provides the flexibility to buy parts of an aircraft that appropriately correspond with a company's or individual's travel per year," Graeme Deary, Executive Director for Business Development at NetJets ME, told Emirates Business. "Your ability to pay is now judged based on the number of hours you fly."
NetJets – a subsidiary of the Saudi Arabia-based National Air Services – is the pioneer of the fractional ownership concept, which is believed to cancel out added costs of a regular charter flight that forces the buyer to pay for the positioning of the aircraft, along with a waiting fee. Fractional ownership also guarantees availability of the aircraft at all times according to them. "The only costs you incur are the lease and acquisition cost, the management fee and the amount you pay for the hours you fly – no hidden costs," Deary said, adding: "This is what makes it the most successful ownership model ever."
The company's Middle East programme has 60 aircraft on order, according to its website, which includes a Hawker 750/800XP, a Dassault Falcon 2000EX/2000 and a Gulfstream 450. However, while Deary told earlier NetJets was poised for significant growth in the region, last year was not too rosy for the US-based NetJets, a unit of Warren Buffett's Berkshire Hathaway.
The company disclosed a 42 per cent or $1.5 billion (Dh5.5bn) decline in revenues during the first three quarters of 2009 compared to the same period a year earlier, according to the 10-Q form filed with the US Securities and Exchange Commission. The report showed a 79 per cent decline in fractional ownership sales and 24 per cent lower flight operations.
NetJets had $531m in pre-tax losses for the first three quarters of 2009, including $436m in asset value write-downs and costs associated with downsizing staff.
Adding to their woes is rival VistaJet, which recently appointed former vice-chairman of NetJets Europe, Robert Hersov, to chair an advisory board as it looks to expand its operations globally, including an aggressive campaign planned for the Middle East.
In a recent interview with Emirates Business, the Swiss-based company's founder and chairman, Thomas Flohr, opposed the viability of a fractional ownership programme surviving in this market.
He said: "The business model will hit many more hurdles in this market, which deals with traditional buyers from Saudi Arabia, the UAE and Kuwait. They are looking to invest in tangible assets, not shared models. In my opinion, this concept is too Americanised for this region."
Deary disagreed, saying: "Not only are we building on an established and successful programme, but we are also recognising the evolution of the executive jet customers and adapting our offering accordingly. Many customers would rather keep their funds intact to utilise in their businesses, as such the NetJets Middle East Programme now offers leasing for periods of one to five years, enabling easy access to the benefits of the fractional programme."
The company offered no figures on the number of investors that have bought into the NetJets fractional ownership model in the Middle East, or its value.
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