Story ID: 
NetJets' Profits Take Hit with Aircraft Cancellations
By: Kerry Lynch
Caption: NetJets earnings are down on the year, but aircraft sales are up as it cancels older orders and realigns fleet with new models.
Word Count: 327
While its aircraft share sales have increased this year, NetJets' earnings suffered in the third quarter as the company continued to streamline its fleet with the cancellations of some older orders and the realignment with new models. In the quarter, NetJets reported a 37-percent drop in earnings from “increased nonfuel flight operation costs and increased general and administrative expenses, including fees to cancel certain aircraft purchases,” parent company Berkshire Hathaway reported.

Berkshire Hathaway often does not break out specifics on revenues and earnings for NetJets and its sister company FlightSafety International, and did not specify which aircraft cancellations eroded earnings in the third quarter. But French airframer Dassault in July reported the cancellation of a NetJets order for 20 Falcon 2000s that dated back to 2006.

The third-quarter results erased earlier gains in NetJets' earnings this year, with profits now down 7 percent year-over-year. This comes as its revenues increased 5 percent in the first nine months, primarily from an increase in aircraft sales, Berkshire Hathaway said. Revenues have been up overall even though flight operations revenues softened from lower fuel cost recoveries.

As the company canceled orders, NetJets is taking delivery of its streamlined fleet including the new Bombardier Challenger 650. NetJets formally accepted the first Challenger last month at NBAA 2015, one of seven it expects to take this year and part of a firm order for 25 and options for another 25. The majority of the new aircraft are replacing models that NetJets is phasing out of its fleet, but sales of the 650 have been strong with most of the early deliveries already pre-sold, said Patrick Gallagher, executive vice president of sales and marketing for NetJets U.S. and Europe.

NetJets has been training crews and readying the recently certified 650 for entry-into-service within the next two weeks . The first 650 share-owner received a flight aboard the aircraft from Naples, Fla., to NBAA 2015 in Las Vegas, Gallagher said, adding the feedback was very positive.