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Warren Buffett-backed NetJets plans Middle East expansion

Posted by adminbhhs on October 22, 2019

Exclusive: Fractional jet ownership firm to open regional sales office in Dubai by Q1 2020

NetJets, the luxury plane unit of billionaire investor Warren Buffett’s Berkshire Hathaway group, plans to expand in the Middle East as it taps growing markets outside its traditional base in the US and Europe.

NetJets, which sells fractional ownership in private jets to individuals and companies, is targeting family businesses, high net worth individuals and whole aircraft owners to boost deals from the region, Michael Graham, senior vice-president at NetJets, told The National on Monday.

“Mideast aircraft owners are thinking much more pragmatically about how they fly, they don’t particularly want to have very capital-intensive assets sitting on the tarmac in their home city, it’s not particularly discrete,” Mr Graham said in an interview in Dubai. “What NetJets allows you to do is to put down a fraction of the cost of capital, a fraction of management and maintenance fees, and fly with much more discretion than you would do if you owned your own plane.”

Ohio-based NetJets, which allows customers to buy shares of private jets and pay-by-the-hour travel to fly on short notice. It has a global fleet of about 750 planes. Mr Buffett’s Berkshire Hathaway bought NetJets in 1998. In 2012, Mr Buffett doubled down with an $18 billion (Dh66.1bn) investment, allowing the company to buy new jets.

NetJets is seeking to expand in the Middle East on a bet that its fractional ownership model will work in the region as ultra-wealthy individuals and corporations re-evaluate how to spend their money — and be accountable to boardrooms and the public for how they allocate it — in the face of a global economic slowdown and geopolitical tensions, Mr Graham said.

“We know that the majority of aircraft are only flown between 150 to 200 hours a year which does not make for particularly good use,” he said. “When there are slowing economies or geopolitical tensions, it pushes people to take a much closer look at how they deploy their capital.”

In the Middle East, Netjets said it is targeting 550 private jet owners, the 10,000 high net-worth individuals worth more than $30m, and the increased number of companies going public to shift to the shared jet ownership model.

NetJets, which has 50 customers in the Middle East, plans to attract 15 to 20 additional customers a year as it grows in the region, Mr Graham said.

As part of its expansion efforts, it will open a new office in Dubai by the first quarter of 2020 to meet expected rise in demand from Expo 2020 and add more staff to boost its regional marketing.

Out of its 1,500 customers in Europe and the Middle East Saudi Arabia is its biggest regional market, followed by the UAE and Egypt.

It expects its busiest travel flows to be services from Riyadh, which make up 65 per cent of its Mideast flights, to European destinations such as Paris, Geneva, Nice and London while Mediterranean destinations are also popular in the summer.

NetJets’ push for growth in the region comes after it exited a partnership with Saudi Arabia’s National Air Services in 2011 because of insufficient demand and a smaller fleet at the time.

Now, the world’s biggest private aviation firm will use its scale to serve the region with a fleet that includes Bombardier’s Challenger 350 and Global 6000 business jet models that are popular in Saudi Arabia and the UAE. In Egypt and the Levant, it sees a good fit for its Cessna Citation Latitude planes for six-hour journeys to Europe.

NetJets sees growth opportunities with companies beyond the oil and gas sector, as the economic diversification agendas of governments in the Arabian Gulf, particularly in Saudi Arabia, bring investment into new sectors such as tech and renewable energy, Mr Graham said.

NetJets flights to and from the region increased by 5.2 per cent year-on-year to June 2019, the company said. Its market share in the Middle East rose by 0.2 per cent to 3.2 per cent during the period.


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