The NetJets SetBy Mel Duvall | Posted 2003-12-01 Print
The secret of how one airplane service profits by catering to the needs, wants and whims of a well-heeled clientele.
When billionaire investor Warren Buffett sinks into a plush leather chair aboard his privately chartered NetJets flight, he counts on finding a glass of Cherry Coke waiting for him. For New York Knicks star Allan Houston, it's a glass of fresh carrot juice, and for Jim Friess, an executive with the storied Claiborne Thoroughbred farm in Kentucky, it's usually a range of food and beverage options stocked ahead of time.
"They are just so good about making sure they have exactly what I or my guests wantour favorite beers, wine, anything," says Friess, who boards the plane at nearby Lexington Blue Grass Airport and has it whisk him to any point in the country with just a few hours' notice. "It's the absolute opposite of flying commercial."
The attention to detail isn't surprising given the amount NetJets' clientele pay for the privilege of not having to wait at check-in lines, fret over connecting flights, search for lost bags, or endure commercial airline meals. With plans that start at about $350,000, individuals and corporations share ownership of a jet with 15 other parties. On top of that, monthly management fees reach about $5,400. For this basic package, a fractional owner gets to use a Cessna Citation V Ultra Jet, which seats seven, for 50 hours during the year.
It's not human memory that makes the magic for customers, though. It's custom-fitted technology.
Hundreds of variables are constantly juggled, from preferred meals and drinks, to pilot and flight-crew availabilities, revised takeoff and arrival plans, scheduled limousine pickups, and up-to-the-minute weather forecasts.
In the scheduled-airline world, travelers have come to anticipate delays and other hassles. But NetJets passengers, says chief information officer Mike Midkiff, expect to have a car waiting at the airport even if their plane is an hour early or if they've arrived at an entirely different destination than originally planned. After all, they've paid for that privilege. "Our customers can give us as little as four hours' notice that they need a plane, and we will get one to their airport of choice. That means we have to be able to react very quickly," Midkiff says.
NetJets, the undisputed leader in the fractional jet-ownership business, has 49% of the market, according to Aviation Research Group. That compares with 30% for its closest competitor, Flight Options. The NetJets story dates to 1964, when a group of retired generals and a collection of celebrities invested in a charter plane venture they named Executive Jet. The company, then based in Columbus, Ohio, didn't really take off until Richard Santulli, a former Goldman Sachs principal, came on board in 1984. Santulli introduced the fractional jet-ownership concept, and began to attract a loyal following of well-heeled clients. Warren Buffett, one of those clients, liked the concept so much, he bought the company in 1998.
When Santulli arrived, there were no computer or automated systems to control and manage flights. With fewer than 10 aircraft, there wasn't much need for it. Today, NetJets is bigger than some commercial airlines. The company manages just over 500 aircraft, operates more than 250,000 flights a year and employs about 4,000 people, including some 2,800 pilots. More than 800 employees are based at the company's Columbus hub, handling jobs such as scheduling, maintenance, customer service and weather forecasting.
The first big information-technology project involved the in-house creation of a customized system called IntelliJet, handling flight reservations, scheduling, crew management and invoicing. In the mid-'90s, the Windows-based system served the company's few dozen planes well. But by the end of the decade, the company clearly needed a replacement system. "By this time, [the company] had between 200 and 300 airplanes with more on order," says Midkiff, who has been with the company since 1990. "We wanted to be able to do more for our owners. We wanted a new system capable of anticipating potential scheduling problems earlier so we could be more proactive."
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