Executive Jet, Inc. History
Woodbridge, New Jersey 07095
Telephone: (732) 326-3700
Toll Free: 800-821-2299
Fax: (732) 326-3737
Incorporated: 1964 as Executive Jet Aviation, Inc.
Sales: $1 billion (1999 est.)
NAIC: 481211 Nonscheduled Chartered Passenger Air Transportation; 532411 Commercial Air, Rail, and Water Transportation Equipment Rental and Leasing; 48819 Other Support Activities for Air Transportation
At Executive Jet, our focus is on safety and customer satisfaction. Today we provide more individuals with safe and cost-efficient aviation solutions than anyone else in the world. With more than 30 years of aviation innovation, experience and success, Executive Jet combines a pioneering legacy with an unparalleled record of innovation. A pioneer then and the undisputed leader now, we are #1 in our field ... and in the air. During the past five years alone, we've introduced more people and companies to business aviation than the top five business aircraft manufacturers combined. We pioneered fractional jet ownership with our NetJets program, offering a highly efficient and cost-effective way for companies of nearly any size to meet the demanding travel requirements of their executives. When we introduced NetJets in 1986, Executive Jet implemented our corporate vision: fractional ownership of jet aircraft--first in the United States, then networked around the globe. Key Dates:
- Executive Jet Aviation, Inc. charter service started by retired Air Force generals.
- Richard T. Santulli introduces NetJets after buying EJA.
- EJA begins to break even.
- Goldman Sachs takes a minority shareholding.
- NetJets Europe is launched.
- Berkshire Hathaway buys EJA.
Executive Jet, Inc. has made multimillion-dollar business jets viable for executives and wealthy individuals by selling fractional ownership in the planes. Similar to timeshares in real estate, the company's NetJets program allows participants to buy as little as a sixteenth share in a new aircraft, then pay fixed fees for maintenance and hourly flight usage. More than 1,600 owners, including such entertainers and sports stars as Arnold Schwarzenegger, David Letterman, Pete Sampras, and Tiger Woods, turn to NetJets for an escape from the increasingly crowded airports and unruly passengers of commercial airlines. Executive Jet bought more than a third of all business jets produced worldwide in the late 1990s.
Executive Jet Aviation, Inc. (EJA) was started in Columbus, Ohio, in 1964 by a group of retired Air Force generals. Its president, Paul W. Tibbets, Jr., had piloted the plane that dropped the A-bomb on Hiroshima; its board included entertainers Jimmy Stewart and Arthur Godfrey. The company focused on chartering business jets until it was bought by a former mathematics professor in 1986.
Richard T. Santulli was born in Brooklyn, New York, circa 1944. The son of a civil servant, he developed a love for horses early, riding rented mounts in Prospect Park. According to Business Week, Santulli studied applied mathematics at the Polytechnic University of New York, earning two M.S. degrees before the arrival of his son in 1967 prompted him to pursue more lucrative work. After a two-year stint with Shell Oil Co., he landed a job at Goldman, Sachs & Co. writing computer-based modeling programs.
Santulli thrived there but left in 1979 after becoming head of the leasing unit and at the verge of being named partner. He was concerned that the high compensation at that level would limit his creative freedom. Santulli then started RTS Capital Services, Inc., which would become the leader in helicopter leasing. In 1982, Santulli cofounded Jayeff Stables, a commercial race horse breeder in Kentucky. He bought Executive Jet in 1984. It was losing money but still had a sterling reputation for service.
As Business Week recounted in 1997, the military mindset had produced records of EJA's every trip--a motherlode of data for the mathematician to mine. Santulli spent months bringing the 'time-share' concept of fractional ownership so often seen in resort properties to business jets. He then made a $4 million down payment on eight Cessna Citation IIs and spent heavily to staff the new enterprise. Thus started the NetJets program in 1986.
Private jets offered much more convenient transportation than scheduled airlines--they could fly on demand to more than 5,000 airports in the United States. They were extremely expensive to operate, however, with high maintenance and fuel costs. The average business jet only made economic sense if flown 400 hours a year--most were flown less than 300. Chartering was best suited for individuals flying 50 hours a year.
NetJets sold the shares, while EJA managed the operations. Although the program initially met with heavy doses of skepticism and resentment from corporate flyers and aircraft manufacturers, the premise was infallible. Cessna became the company's first believer among aircraft makers. By the end of 1987, NetJets was operating 14 planes.
NetJets sold one-eighth shares equivalent to about 500 flight hours a year--on a Cessna Citation S2, this cost $330,000 in 1994. Fixed costs added about $60,000 per year, and passenger-carrying flight time cost an additional $1,000 an hour. With fractional ownership, there was also no down time for maintenance--this usually amounted to 45 days a year for planes owned outright. Quarter-share owners even had access to more than one plane at a time. Like full owners, fractional owners could deduct for depreciation on their taxes.
Santulli maintained a 'core fleet' to deal with the problem of simultaneous requests and guaranteed a plane anywhere in the United States within a four-hour notice (later increased to six hours for one-eighth shareholders). The Economist noted that the jets could even be customized at the last minute with magnetic logos and monogrammed seat cushions.
A Positive Rate of Climb in the 1990s
When Santulli bought EJA in 1986, Wall Street was flooded with wealth and private planes were the favorite perk of many well-paid executives. The recession of the early 1990s, however, brought boardroom scrutiny to high-visibility expenditures such as business jets. EJA benefited from the resulting wave of corporate cost-cutting. Still, the company nearly went bankrupt during this time; Santulli had personally signed for $125 million in bank loans. EJA posted $65 million in revenues in 1992; business lifted in 1993 when the company began offering larger aircraft. The company broke even the next year. The list of clientele reached 220 in 1994. Revenues reportedly tripled in the mid-1990s, although the privately owned company did not release specific figures.
By this time, competition had surfaced in Europe, in theory at least. Air London International began timeshares through its JetCo service before actually buying any planes. Bombardier Aerospace Group and AMR Combs Inc., the charter sibling of American Airlines, introduced the Business JetSolutions program in May 1994. For its part, EJA entered a partnership with Gulfstream, letting that maker handle the marketing through its Gulfstream Shares program.
NetJets accounted for 85 percent of EJA's business; the company continued to offer charter services. Most of the 290 customers lived in the triangle marked by Chicago, New York, and Miami. Company headquarters were located in Montvale, New Jersey, while operations were based in Columbus, Ohio, where EJA had 340 employees.
Goldman, Sachs & Co. took a 25 percent shareholding in the company in the autumn of 1995. EJA operated more than 40 jets and had become the biggest customer of Gulfstream Aerospace, Cessna Aircraft Co., and Raytheon Co. The company had about 400 employees overall at the beginning of 1996. Vincent Santulli joined his younger brother at Executive Jet later in the year. He had previously developed his own electronics company, PortsSystems.
Entering 1997, EJ employed more than 500 and fielded 80 airplanes. It planned to spend $375 million to expand its fleet to 100--more planes (though much smaller ones) than Air Canada, the Columbus Observer noted. EJA had revenues of more than $500 million in fiscal year 1996--97. Its customer base had grown to 700, mostly through referrals, according to Business Week. Tennis star Pete Sampras gave NetJets one of its most glowing testimonials, crediting the program with extending his playing career by one or two years through sheer convenience.
Although GE was its largest customer, most of EJA's clients had never owned business planes before; they were 'concept buyers.' About 800 companies and individuals were fractional owners in the United States, according to the National Business Aviation Association figures reported in the New York Times. Most of the 11,500 business jets and turboprops were owned by 8,000 companies.
At the time, a one-eighth share in a Cessna Citation S2 cost $305,000 and allowed for 100 occupied flight hours for five years. The plane sold for $2.3 million outright. NetJets also had begun offering sixteenth shares. The price was $389,000 for a sixteenth of a Citation 5 Ultra, a plane that sold for $6 million whole in 1997. A quarter share of a top-of-the-line, 13-seat Gulfstream IV cost $6.8 million.
EJA ordered more than $2 billion worth of aircraft in 1997. Even as Raytheon Aircraft was preparing to launch its own fractional ownership service, in May 1997 EJA gave the company its largest order ever--20 Hawker 800XPs worth $210 million. Raytheon's CEO, Arthur Wegner, praised Santulli as a pioneer who 'demonstrated tremendous vision,' uplifting the entire business jet industry. A few months later, EJA ordered $400 million worth of Cessna Citations Excels (to be delivered over five years)--the largest order for business jets ever.
A joint venture with Boeing Business Jets and GE was announced in October 1997. The Boeing Business Jet (BBJ) in development was based on the successful Boeing 737 medium-haul airliner, modified to seat fewer people (12 to 50) and have the range for intercontinental trips. Costing a bit more than other top-end corporate jets such as the Gulfstream V, the BBJ offered three times the interior space (807 square feet).
EJA hired 240 pilots in 1997 and planned to add 260 employees in 1998, 200 of them pilots, giving the company 930 employees in Ohio. The number of employees exceeded 1,000; half were pilots. Commercial airlines also were expanding, making flight personnel scarce. The company also was investing $16 million to set up new facilities at a former McDonnell Douglas plant in Columbus.
New Horizons in the Late 1990s
In the spring of 1998, a group of Middle East investors bought a dozen Gulfstream IVs, to enter service in early 1999. Gulfstream Shares also was pitching the 6,500 nautical mile range of the Gulfstream V for the region. The Cessna Citation 10 was another model slated for use within the region. EJA signed contracts for more than $1 billion worth of new aircraft and maintenance from Gulfstream in October 1998, expanding their relationship significantly.
Minority shareholder Goldman, Sachs was urging Santulli to take the company public to raise money for expansion. In July 1998, however, Warren Buffett's Berkshire Hathaway Inc. announced that it was buying EJA for $725 million in stock and cash. Called 'the most astute investor of the 20th century,' and the world's second richest man after Bill Gates, Buffett had been an avid EJA customer since 1995. Berkshire Hathaway's superior credit rating lowered EJA's interest rates, and the company joined an esteemed portfolio including Coca-Cola Co., Gillette, and Walt Disney.
After buying the company, Buffett, who had appeared in Executive Jet advertising before, spoke at high profile gatherings in expensive hotels to pitch the concept to celebrities. At the time, an eighth share in a Cessna Citation V Ultra cost $835,000 plus $7,608 a month for maintenance. The owner could fly 100 hours a year at $1,242 an hour.
Executive Jets was on its way to billing $900 million in revenues for the year. Santulli continued to run the company after the acquisition. He applied his math acumen to breeding horses as well, and developed a stable said to be worth $60 million.
Executive Jet had entered the European theater in 1996 but found it much more complex. Airport operations were much less flexible there. Buffett stated that only 1,100 of 9,000 business jets around the world were based in Europe, making the market there seem fertile for the fractional ownership concept. NetJets Europe had 40 customers and ten planes in April 1999; by the end of the year, it had 70 customers and 17 planes. Virtually all of the European owners also took advantage of the ability to use their shares in the U.S. NetJets program as well.
Executive Jet gave Raytheon another record-setting order in June 1999, for 50 Hawker Horizon business jets worth $2 billion. Bombardier's FlexJet fleet reached 100 planes in 1999 and was gaining rapidly. Still, Executive Jet remained the king of the sky. Its total fleet was 265 planes in early 2000, with more than 500 on order. A planned expansion into Asia glowed on the company's horizon.
Principal Divisions: Executive Jet Charter; Executive Jet International; Executive Jet Management; NetJets Europe; NetJets Middle East.
Principal Competitors: FlexJet; TravelAir.
- Bianco, Anthony, 'What's Better Than a Private Plane? A Semiprivate Plane,' Business Week, July 21, 1997, p. 52.
- 'Buffett Makes Push for Jets in Europe,' Omaha World-Herald, April 14, 1999, p. 22.
- Carter, Ron, 'Aiming for the Clouds, Executive Jet Stakes Future on Business Flights,' Columbus Dispatch, January 2, 1997, p. 1B.
- ------, 'Executive Jet, Boeing Flying in Formation,' Columbus Dispatch, October 22, 1997, p. 1C.
- ------, 'Executive Jet Future Soars on New Order,' Columbus Dispatch, June 17, 1997, p. 1F.
- ------, 'Executive Jet Has High Hopes,' Columbus Dispatch, May 21, 1996, p. 1D.
- ------, 'High-Flying Venture,' Columbus Dispatch, October 2, 1995, p. 1.
- ------, 'Hiring Flies High in Plan at Executive Jet,' Columbus Dispatch, October 2, 1997, p. 1B.
- ------, 'Stars in the Sky: Executive Jet Becoming Transportation of Choice of the Rich and Famous,' Columbus Dispatch, December 12, 1999, p. 1F.
- Gerena-Morales, Rafael, 'Warren Buffett to Buy Montvale, N.J. Executive Jet Inc.,' Record, July 24, 1998.
- Minard, Lawrence, 'The Great Santullis,' Forbes Global, November 1, 1999.
- Moskal, Brian S., 'Up, Up, and Away,' Industry Week, June 19, 1995, p. 17.
- Nussbaum, Debra, 'Spending It: Owning a Fraction of a Jet,' New York Times, July 27, 1997, p. 10.
- 'The Other Mile-High Club,' Economist, September 24, 1994, p. 72.
- Phillips, Edward H., 'Low Cost Key to Fractional Ownership,' Aviation Week & Space Technology, September 22, 1997, p. 63.
- Rasmussen, Jim, 'Omaha, Neb.-Based Berkshire Hathaway to Buy New Jersey Jet Firm,' Omaha World-Herald, July 23, 1998.
- Velocci, Anthony L., Jr., 'Fractional Ownership Apt to Validate BBJ Market,' Aviation Week & Space Technology, p. 71.
- Zuckerman, Laurence, 'Private Jets for (More of) the People,' New York Times, June 27, 1999, p. 2.
Source: International Directory of Company Histories, Vol. 36. St. James Press, 2001.