NetJets business model and operations

NetJets

The two primary attributes that NetJets relies on are convenience and quality, including safety of the jet aircraft (Infanger, 2007) from maintenance through its operation. The following is a graphic of these two attributes relative to competitors.

NetJets Comparison Quality vs. Convenience

TARGET MARKETS

NetJets segments its markets geographically with NetJets U.S. And NetJets Europe being the primary segmentation criteria (Salter, 2005). This geographic segmentation is based on the needs for logistics to be more aligned with the needs of their fractional aircraft owners. In the past NetJets supply chain throughout Europe was the cause of dissatisfaction, therefore the company created a separate European subsidiary (Foust, 2007). Earlier this year, in April 2008 the company also announced a spin-off subsidiary to sell into the Indian market as well, relying on the European supply chain for this specific new market development strategy (Govindasamy, Sarsfield, 2008).

In addition to these geographic segmentation criteria, NetJets also differentiates by Corporate vs. Individual accounts. According to published data on their distribution of customers by segment, 70% of customers are Corporate Accounts, and 30% are from Individual Accounts. Of these Corporate Accounts, General Electric (Infanger, 2007), and from the Individual Account segment, Tom Brady, member of the New England Patriots, is one of their major spokespersons and clients.

The primary product categories of the NetJets Corporation are the company's Fractional Aircraft Ownership Program, most often used by their Corporate Customers, and their Marquis Jet Card, a second service offered for small businesses and Individual accounts. Growth of the Fractional Ownership Program has been so significant in Europe that last year NetJets placed the largest single order for private jet aircraft on record (Sarsfield, 2007). The Fractional Aircraft Ownership is best for those corporations that require at least 50 hours or more per year, with less than 3 hours notice and the need of jet service during peak periods of the year. It is not surprising that many national and international retailers including Federated Stores, Wal-Mart, Tesco and other global mass merchandisers. The Marquis Jet Card is for those customers who less than 50 hours per year and prefer a short-term commitment. This is also considered an introductory service for Corporate clients as well. While the NetJets Fractional Aircraft Ownership Program has 5 large cabin jets including two Gulfstream configurations and the Boeing Business Jet which is a modified 737, the Marquis Jet Card offers only two large cabin jets, the Gulfstream 450/400 and Dassault Flacon 20000EX. The Marquis Jet Card also is sold in a $250,000 increment of Individual Account Holders who want to gain access to the Boeing Business Jet for their specific needs. NetJets did this to segment out their top 100 Individual Accounts, and the program has been so successful that an aftermarket has begun to emerge with the resales of these $250,000 memberships for $500,000 or more. The following is a product/market grid of NetJets services offerings:

Product-Market Grid

Markets

Fractional Aircraft Ownership

Marquis Jet Card

Corporate

Designed for accounts who need over 50 hours of jet service per year;

Supported with 5 light cabin; 5 midsize cabin and 5 large cabin jets; designed to allow for short lead-times and support during peak hours

Most often used by small business owners with high-growth, decentralized locations, the 50-hour limitation and pricing model works for their specific needs.

Individual

Less than 1% of Individual Account holders need a personal jet service for more than 50 hours per year; even professional golfers do not reach their 50-hour limit for example; Tennis professionals however are the only exception.

Designed for accounts that fly less than 50 hours per year and prefer the pricing model of a year commitment vs. purchasing an entire fractional jet share. Fleet includes 4 light cabin jets, 4 midsize cabin jets, and 2 large cabin jets.

PRODUCT STRATEGY

The market development strategy of NetJets is to continually refine their two dominant services, which are the Fractional Aircraft Ownership Program and the Marquis Jet Card. The market development strategy also has international objectives as well, as NetJets builds out its European market presence and competes with Virgin Charts in the UK and Bombardier Flexjet also throughout Europe and Asia. As NetJets is primarily a services business, their focus is on being the trusted advisor to fractional aircraft ownership Corporate and Individual accounts.