Money Matters - Simplified

Berkshire Hathaway to augment fleet of NetJets

Warren Buffett's Berkshire Hathaway Inc. has placed a record order of $9.6 billion with Bombardier and Textron which entails the purchase of 425 jets.

The private-jet market may be reeling under severe recessionary conditions; however Warren Buffett's Berkshire Hathaway Inc appears to be unscathed.

Going by the latest round of purchases, the third in less than two years, Berkshire Hathaway is gambling on a rebound in the sector in the coming years.

Positive outlook
The business-jet demand has slumped since the onset of the recession of 2008. NetJets Chief Executive Officer Jordan Hansell now expects that the U.S. and European economies will “ultimately come back to a much stronger position.”

The Nebraska based conglomerate has placed an order valued at $9.6 billion wherein it will buy 425 jets from Bombardier Inc. and Textron Inc’s Cessnas.

Hansell said that the latest purchase will strengthen Berkshire's NetJets. “It's prudent to take a stand now and make a decision now to be sure that we're well positioned to compete over the longer term,” he opined.

The CEO was of the considered opinion that adding to the range and endurance of NetJets’ fleet will enable the company reach more destinations globally.

Good Time to Buy
Bombardier deliveries will begin in two years from now while the Cessnas deliveries are scheduled to begin in 2016.

“This is a favorable time to buy. It's a good demonstration of the anticipation of cycles,” opined Michel Merluzeau, an aviation consultant for G2 Solutions in Seattle.

“All the manufacturers want to make a deal today. They're able to secure significant discounts because they are fleet orders. You wield a lot of power when you go in and place an order like that,” said Janine Iannarelli, president of Houston-based plane broker Par Avion.

The NetJets order is being viewed as a “positive development” at a time where the demand for private jets has waned.