Story ID: 
NetJets Moves To Expand Longer-haul Business
By: Kerry Lynch
Caption: NetJets introduced new incentives with price breaks on longer flights for Challenger 350 and Global customers.
Word Count: 853
NetJets is hoping to tap into the still relatively small but growing longer-haul business with new pricing incentive programs developed for Challenger 350 and Global shareowners. Launched this month, the cross-country program provides operational savings on 3.5-plus-hour flights for Challenger 350 shareholders who have purchased a minimum of 50-plus hours (1/16th of a share).

The company also has developed a transatlantic program providing savings on five-plus-hour flights for Global 5000 and 6000 shareholders who have purchased a minimum of 50-plus hours. The cross-country flights must fall within NetJets’ cross-country service area, while the transatlantic flights must depart the NetJets Collective Service Area (essentially the U.S. lower 48 states, along with a few locations in Canada) and arrive in the company’s European primary operational area.

The pricing programs are unique for NetJets, which doesn’t typically offer such incentives, said Patrick Gallagher, executive v-p, sales and marketing for NetJets, but represent an opportunity for the fractional provider to grow in the longer-haul space.

“This is really more about capturing a market segment that is relatively small today than it is about the opportunity to create additional incentives,” Gallagher said, adding, “We have plenty of customers that are flying with us today going back and forth to Europe on a Global or going cross-country on a super-midsize airplane like the Challenger 350.” The reception to the company's Challenger 350s and Globals has been “very good.”

But, he added, “There are a whole lot of people still doing that via other means, whether it is commercial or ad hoc charter or owning your own airplane. We are really trying to attack that wallet share that we don’t have today, and we are able to pass along some efficiency gains that we have on flying those longer routes.”

The average flight time for NetJets has remained at two hours for years. “That holds true for much of our industry,” Gallagher said, adding that average is largely driven by economics of an industry that tends to charge by the hour. “About 10 percent of our flights are cross-country. It's obviously appetizing for us to grow that segment,” he said.

The larger aircraft, longer-haul business has been growing at the same rates of its other businesses, he said. “It hasn’t been stagnant. It hasn’t been shrinking,” but it is an area where NetJets sees potential, Gallagher said. “We think it is a great opportunity.”

He also stressed that programs are driven by customer inquiries. “We’ve had a lot of interest in recent months,” he said. “It’s something we simply formalized.  We’re highly confident in our ability to sell it.”

Programs like this are helping NetJets evolve and strengthen during a time that has been tumultuous for the fractional industry. “The fractional industry in general has suffered a lot over the past few years,” Gallagher said. “We’ve seen a number of competitors exit the stage, and we’ve seen consolidation.” He pointed to the exits of CitationAir and Avantair, as well as the merging of Flexjet and Flight Options.

At the same time, NetJets has been growing. Noting the numerous ways to measure growth of fractional operations, he said, “No matter how you slice that, NetJets absolutely has returned to growth.”

The company’s sales numbers have been increasing each year since the downturn, he added. “Our business is doing quite well, but the fractional industry has suffered. We’re growing our market share of a shrinking pie.”

He believes a key factor in the resurgence has been the decision to streamline the fleet and add new anchor models in each market segment. “The customer reception has been great,” he said. He pointed the Challenger and Global acceptance, but also noted the company has increased its Phenom order. 

Many operators will make larger order announcements at the NBAA annual convention, but that will not necessarily translate into full deliveries, he said. “It could not be more different in our case. We’re not only exercising firm orders; we’re exercising the options as well.”

He noted NetJets' recent decision to up its order for the Citation Latitude from 150 of the aircraft to 200 and accelerate the delivery schedule. Gallagher was particularly enthusiastic about the introduction of that model. “We’re very excited about that airplane. I can’t remember an aircraft that we’ve introduced that has so much buzz associated with it,” he said.  “We’ve introduced lots of great airplanes, but the Latitude addresses such a wide segment of the market with midsize jet operating economics but almost a super-midsize cabin. People are finding that very attractive.”

While the new fleet and pricing programs are helping NetJets grow, Gallagher maintained, “The underlying value proposition of Netjets has not changed. People buy with us for guaranteed availability, more consistency and for our reputation for safety. Those remain the key pillars of the NetJets system. We’re excited to introduce a new way for people to tap into that.”