Private Jet Business Strong in US, Challenged in China: NetJets CEO

Warren Buffett's private plane company NetJets is seeing improvement in its U.S. and European business, but the climate in China remains difficult among a government push for austerity, CEO and Chairman Jordan Hansell said Friday. "We're an animal spirits business, so we are on the cutting edge of the economic trends," he said on CNBC's "Squawk Box," adding that the private jet rental business hinges on GDP growth, stock market performance and consumer confidence.

The crude oil rout that has halved prices has also been a boon to business, reducing NetJets' fuel surcharge that customers pay by 40 to 50 percent at times, he said. NetJets' United States business has been strong for the last 18 to 20 months, and Europe has "bubbled along" in tandem with macroeconomic conditions, with some improvement in the back half of last year and the beginning of 2015, he said. However, the Chinese market remains challenging amid a government crackdown on once high-spending officials, as well as graft and corruption. "In China with the austerity campaign it's been quite slow, but we're new there so it's always hard for us to draw too firm a conclusion in those circumstances," Hansell said. NetJets launched a limited service in China last year.

Hansell said reports that the campaign had slashed the market for private jets by upwards of 60 percent were "about right." While demand among private fliers has stayed strong, business among government officials has dropped significantly, he added. Hansell made his comments in an interview from Omaha, Nebraska, where investors are gathering for Berkshire Hathaway's annual meeting on Saturday. The multinational conglomerate purchased NetJets in 1998, three years after Buffett became a customer.

Some NetJets pilots said they would protest at this year's meeting, which is expected to draw an exceptionally large 40,000 people for Berkshire's 50th anniversary. Management has been embroiled in contentious negotiations with its pilots. The company wants to reduce its budget by 5 percent, obtain benefits concessions and have at least 200 crew members voluntarily give up their jobs.

On Thursday, Buffett said he doesn't see NetJets' pilots packing up and going elsewhere. "I say we've got a good business and they've got good jobs. They average about $145,000 annually and they are on for seven days and off for seven days. They like the work arrangements. They like the fact that they can enter the system at almost any place, which is unlikely with the airlines."

Hansell said, "I think Warren said it best. We have the greatest pilots in the world, but we need to have a competitive and sustainable business and that's our goal throughout the entire process."

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