On the Record with
KEVIN RUSSELL, EXECUTIVE VP, NETJETS, INC.

NetJets is NetJets, But You Knew That

The company formerly formally called Executive Jet, Inc. has dropped that handle and now calls itself NetJets, Inc. -- NetJets being the name of the pioneering aircraft fractional ownership program that has vaulted the business jet beyond the fighter in terms of economic importance, and is arguably the most significant factor in all of aerospace over the last 20 years.

Kevin Russell, Executive Vice President

One estimate is that the number of fractional shares, industry-wide, increased from a mere three in 1986 to 4,731 in 2001. NetJets is said to enjoy a market share of 49%. "This year we're going to do over 250,000 flights," says NetJets executive vp Kevin Russell. "We've been to over 145 countries this year," he says, averaging 1,100 international flights per month from the United States alone.

September 11 and the ensuing wave of corporate accounting scandals and drop in stock values -- Russell says there is now $7.5 trillion less in the economy than there was in 1998 -- do not seem to have hurt. The NetJets man says, in fact, that "2002 performance has been very good."

The economic situation, he says, "has reinforced with a lot of people the fact that NetJets makes a great deal of financial sense." Russell cites the case of Aetna Insurance, which operated a Falcon 2000 and a pair of Sikorsky helicopters. Seeking to save money, "They came to us," he reports. NetJets worked out a solution that has allowed Aetna to close its flight department, bank the money it got for the aircraft it sold, and pare its operational expenses by some $3.5 million per year.

NetJets is adept at practicing discretion, too, for executives not wishing to be accused of pampering themselves at the expense of shareholders. "A number of companies are looking to leave certain assets off their books," Russell says. NetJets will provide an operating lease instead of a purchased aircraft share, allowing customers to "manage that cost and spread that cost out."

"Sometimes a third party will provide that lease alternative," he says of the "off-balance-sheet" transactions. He declines to say whether such deals are more lucrative for NetJets. "It enables them to save that cash and use it for other investments within the company," he says.

"Our service is a CFO's delight," Russell continues. With pre-set fees and hourly costs, "there are no surprises." The service, like all business aviation, is also seen as being fundamentally more secure than scheduled airline flight, as well as being almost infinitely more convenient.

NetJets has a new "economy" package too, dubbed Marquis. The program, established last year, allows premium flyers to take as little as 25 hours per year of business jet service without actually purchasing a fractional share. The Marquis "Private Jet Card" scheme allows for short-term, pre-paid leases in 25-hour increments of "occupied hourly" time. Costs range from $109,000 to $255,000, depending on aircraft.

The NetJets message for Orlando? "If you're looking from a corporate standpoint to supplement your fleet, or find other alternatives that will satisfy the needs of your company, then you should investigate NetJets," Russell says. "NetJets fractional ownership makes great financial sense."

By Rich Piellisch

74 More
NetJets has quietly moved to add an almost unbelievable 74 aircraft worth $1.3 billion to its fleet this year, bringing the total number of jets either in-service or on-order to 1,019, up from 945 in September 2001.

"These are new orders," executive vp Kevin Russell says of the 74-and they were placed without any fanfare.

Types include Cessna's Encore, Excel and X, Raytheon's Hawker 800XP, the Falcon 2000, and Gulfstream IVs and Vs, Russell says.

The standout? The Excel. "It's just a huge success," Russell says. "I think the Citation Excel is destined to become the most popular business jet ever built." NetJets has 113 Excels, either ordered or in service.

Approximately 490 NetJets aircraft are in service going into NBAA 2002 in Orlando.

China, Anyone?
NetJets is quietly laying the groundwork for the advent of corporate aviation in China, and has forged such close relationships with authorities there that it has actually written guidelines for the Chinese government on how best to establish a business aviation sector.

"We continue to investigate China," says NetJets executive vp Kevin Russell. "We have been working with the Chinese authorities on how to introduce private aviation to that market."

"We have a team of people at NetJets who are spending considerable time in that part of the world," he says.

China has "no plethora of FBOs" to provide necessities and amenities taken for granted in the U.S. and increasingly in European business aviation, Russell says.

The phenomenon of a government's calling on a private firm to draft guidelines for a regulatory structure on aviation is probably unprecedented, Russell says, yet it has happened with NetJets and China. "We do more trips to China than all the other private flight organizations combined," he claims.