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• Drinks
  Shafer Napa Valley Cabernet Sauvignon
• Good Life Guide
  Wilson TRIAD Racket
• Good Life Guide
  MINI Cooper S
• Good Life Guide
  Panama Hat
• Good Life Guide
  The Ideal Cuban Sandwich
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Inside NetJets Control Room

How NetJets workers manage the world's sixth largest airline

Jack Bettridge
From the Print Edition:
Air Sick, Jul/Aug 02

The old story goes that a man inquiring about the price of a yacht was told if he had to ask he couldn't afford it. But what if you're looking at a private jet and you only want to buy a sixteenth share? If you buy from NetJets, for roughly the price of two Ferraris ($375,000) you can get the right to fly 50 hours a year on a Citation V Ultra, which will carry seven passengers at a high speed of 480 miles an hour for a flight range of up to 1,840 miles. Keep in mind, however, that on top of that you pay a monthly management fee of $5,420 ($65,040 a year) and an hourly in-flight fee of $1,343 ($67,150 a year). If you go with NetJets' largest offering, the Boeing Business Jet (carries 19 passengers at speeds over 500 miles an hour up to 6,555 miles, includes two showers, a bedroom, a private office, a conference/dining area and a lounge), you might not want to ask. The smallest fractional is an eighth share at $6,500,000 and gives you the right to 100 hours. The monthly management fee is $43,100 ($517,200 a year) and the hourly fee is $4,500 ($450,000 a year).

One mitigating factor is that a new jet retains about 80 percent of its value over five years, which is the length of a NetJets management contract. NetJets marketing director, Kevin Russell, who estimates the typical customer's net worth at over $20 million, slices the costs another way. Looking at an eighth share of a Citation X, which carries eight passengers up to 3,000 miles in speeds approaching 600 miles an hour, he estimates an average hourly occupation cost over five years at $1,600. He does that by totaling in-flight costs and monthly maintenance over five years, adding the interest expense (6 percent) for the acquisition fee of $2,356,000 that you pay at the beginning, and including a federal excise tax (7.5 percent) as well as annual depreciation. From that total he subtracts tax benefits assuming the jet is always used for business and your income tax rate is 40 percent. From a total of about $800,000 over five years, he divides by 500 and comes up with $1,600. You had to ask.

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