In the wake of the global financial crisis, Warren Buffett, the billionaire investor behind Berkshire Hathaway, faced significant challenges with the company’s business aviation holdings. Chief among them was NetJets, the fractional jet ownership provider. In 2011, Buffett expressed serious concerns.
However, Berkshire Hathaway’s decision to keep its faith in the sector has proven to be a stroke of genius, especially as the world emerged from the pandemic’s grip. As travel restrictions lifted, demand for fractional aircraft ownership surged. NetJets and other established players, like Flexjet, experienced an unprecedented spike in customers, a trend that has continued well into 2024.
Historic Highs for NetJets
The last Sunday of October marked a milestone for NetJets, as the company recorded its busiest day ever, with 898 customer flights flown—excluding repositioning sectors. Patrick Gallagher, president of NetJets, expressed gratitude to its teams for making the day “NetJets history,” signaling the high demand that continues to shape the sector. Flexjet, too, is reporting strong growth, with US fractional flights up 8.4% in October 2024 compared to the previous year, according to Argus Analytics.
The Shift from Jet Cards to Fractional Ownership
A key contributor to the sector’s success has been the wave of customers who transitioned from jet cards to fractional ownership. While some may have expected this post-Covid demand to fizzle out, the opposite has occurred. Fractional shares remain an attractive option, especially as buyers look for convenience and simplicity in a market filled with complex operational issues.
Owning a fractional share may come at a premium, but it alleviates the headaches associated with aircraft ownership, such as sourcing pilots, securing hangars, and managing parts and supply chain delays. For customers, this is a compelling offer, especially as these responsibilities shift to the provider. Both NetJets and Flexjet have positioned themselves as attractive options for individuals and corporations looking to streamline the ownership experience.
Pilot Shortage and Fleet Expansion
One of the challenges facing the aviation industry over the past few years has been the shortage of pilots. However, the largest fractional operators have managed this issue more effectively. Flexjet, for instance, has worked hard to maintain a strong relationship with its pilots, resulting in about a third of its pilots staying with the company for more than 15 years. Despite some tensions earlier in the year with NetJets’ pilot union, the company continues to retain and hire new pilots.
This pilot retention has been crucial as both NetJets and Flexjet continue to expand their fleets. In 2023, the two companies together accounted for 20% of all business jet deliveries, with Flexjet and NetJets taking 94 jets out of a total of 493. For every new aircraft, fractional operators typically need five pilots. As a result, both companies are now facing growing needs for pilot recruitment and retention, particularly as they expand their operations.
NetJets took delivery of its 50th jet in October 2024 and is already sold out for the next year, with plans to take 100 jets in 2025. Flexjet is also fully sold out for the first part of next year. As the largest customers of aircraft manufacturers, these companies receive priority access to parts and maintenance, further strengthening their position in the market.
The Growing Appeal of Fractional Ownership
Despite growing concerns around jet shaming, tax audits, and ESG (Environmental, Social, and Governance) reporting, fractional ownership is gaining traction among those who wish to sidestep the complexities and scrutiny of full aircraft ownership. The appeal lies in the simplicity and efficiency of fractional ownership—allowing customers to enjoy the benefits of private aviation without the associated headaches. As Buffett famously writes in his shareholder letters: “Come by bus; leave by private jet. Live a little.”
As we look to the future, fractional ownership remains a driving force in the business aviation sector, thanks to the resilience and foresight of key players like NetJets and Flexjet. Their ability to meet the growing demand while navigating the challenges of fleet expansion, pilot shortages, and changing customer expectations shows just how far the sector has come since its darkest days.
